Testing hysteresis for the US and UK involuntary part-time employment

Abstract

ABSTRACT In this paper, we test the persistence of involuntary part-time employment, making use of large historical series for the US and UK. We adopted a comprehensive macro-econometric approach, based on a battery of panel and time series unit root and stationarity tests, also allowing for flexible specifications as fractional integration and structural breaks in the series. For both countries, our results provide robust evidence on the existence of a long memory process and a structural break in the mean of the series in The Great Recession surroundings. Importantly, these findings suggest that relevant shocks affecting labour market outcomes (e.g. The Great Recession) are likely to have long-lasting structural effects on underemployment shares. Fortunately, this result also leaves room for designing effective labour market policies to counteract structural underemployment in the long-run. Finally, the micro-economic roots of this aggregate behaviour claim for further investigation.