Akademik Veri Yönetim Sistemi
Ekonomik Yaklaşım, cilt.31, sa.114, ss.1-37, 2020 (Hakemli Dergi)
This
paper aims to investigate the evolution of the persistence of Spanish unemployment
by embodying the output gap in a state-space model over the period of 1972-2015.
While the adult unemployment rate is analyzed as the benchmark to
explore the aggregate condition, with the use of the disaggregated data by age
and gender we aim to further unveil the conceivable heterogeneity among the
subgroups. Unlike the existing
literature which identifies labor market rigidity as the triggering factor of
high unemployment, we utilize the output gap extracted by the Kalman filter in
order to discriminate between impacts originated from (demand side) shocks and
labor market institutions. The time-varying parameter approach allowing for
both abrupt and smooth structural changes of parameters facilitates to explore how
unemployment persistence evolves over time in the country whose history is full
of crises and labor market reforms. Our estimation results reveal that the
presence of lags between the implementation of the policy and its influence on
the economy and the interactions between the shocks has induced direction
towards the gradual changes in Spain. Estimation results providing evidence in
favor of hysteretic effects during the late 1970s and the early 1980s reveal a
declining (rising) coefficient for lagged unemployment (output gap) in the
subsequent years. Whereas abrupt changes of coefficients after 1984 and 1994
reforms coincided with the start of recovery phases, smooth transition of
persistence coefficient after 2008 underlies different dynamics.