DP858 | Explaining Disparities in Unemployment Dynamics

Publication Date

30/11/1993

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Abstract

This paper attempts to explain disparities among the unemployment experiences of different OECD countries in terms of the `fragility' of the short-run unemployment equilibrium (the impact of labour market shocks on the short-run unemployment rate) and the lag structure of the employment determination, wage setting, and labour force participation decisions. The effects of this lag structure on unemployment dynamics are captured through two general measures of `unemployment persistence' (occurring when temporary shocks have prolonged effects on unemployment) and `imperfect unemployment responsiveness' (occurring when permanent shocks have a delayed effect on unemployment).