Is There A Stable Long-run Relationship Between Unemployment And Productivity?

João Tovar Jalles

doi:10.1515/cer-2015-0012

Authors

João Tovar Jalles Center for Globalization and Governance, Nova School of Business and Economics, Portugal

DOI:

https://doi.org/10.1515/cer-2015-0012

Keywords:

stationarity, structural breaks, cointegration, DOLS, Granger causality

Abstract

This paper assesses whether productivity and unemployment have a stable long-run relationship. We explore a panel of 19 OECD countries between 1970 and 2012 and rely on recently developed time series econometric methods. Our findings suggest that unemployment and productivity are non-stationary in levels and in many individual cases these series are cointegrated, even after accounting for possible structural breaks. For many individual countries the long-run effect seems to be generally positive. There is also evidence of two-way causality, but the stronger directional relationship runs from unemployment to productivity.

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