Do Real Wages Respond Asymmetrically to Unemployment Shocks? Evidence from the U.S. And Canada

Posted: 23 Sep 2001

See all articles by Selahattin Dibooglu

Selahattin Dibooglu

University of Missouri at Saint Louis - Department of Economics

Walter Enders

University of Alabama - Department of Economics, Finance and Legal Studies

Abstract

Using a set of cointegration and error correction models with asymmetric adjustment, this paper investigates aggregate labor market adjustment in the U.S. and Canada in the post-1973 period. Empirical results show real wages, productivity, and unemployment are cointegrated. Adjustment towards the long-run equilibrium seems to be linear for the U.S. and non-linear for Canada. The dynamic adjustment of real wages to unemployment and productivity shocks show markedly different responses to positive shocks than negative shocks in Canada. However adjustment in the U.S. is mostly symmetric. This difference between the U.S. and Canadian real wage responses may provide an answer to the recent divergence of unemployment rates between the U.S. and Canada.

Suggested Citation

Dibooglu, Selahattin and Enders, Walter, Do Real Wages Respond Asymmetrically to Unemployment Shocks? Evidence from the U.S. And Canada. Available at SSRN: https://ssrn.com/abstract=271081

Selahattin Dibooglu (Contact Author)

University of Missouri at Saint Louis - Department of Economics ( email )

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Walter Enders

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

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Tuscaloosa, AL 35487
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