Unemployment Gap Research Articles

The Impact of Immigration and Integration Policies On Immigrant-Native Labor Market Hierarchies

Across European Union (EU) labor markets, immigrant and native populations exhibit disparate labor market outcomes, signifying widespread labor market hierarchies. While significant resources have been invested in migration and integration policies, it remains unclear whether these contribute to or mitigate labor market hierarchies between natives and immigrants. Using a longitudinal model based on individual-level EU LFS and country-level DEMIG POLICY and POLMIG databases, we explore variation in changes of immigration and integration policies across Western EU member states to study how they are associated with labor market hierarchies in terms of unemployment and employment quality gaps between immigrant and native populations. Our findings imply that designing less restrictive policies may help mitigate immigrant-native labor market hierarchies by reducing existing labor market disadvantages of immigrants and making the most of their potential.

Analysis of Household Behavior in Consumption According to Members and Ages and its Impact on Public Consumption of Iraq

Public consumption is one of the main components of the total demand function, which affects economic stability, inflation, unemployment, and the success of monetary and financial policy in achieving its short-term goals. Therefore, household behavior in consumption and analysis of the factors affecting in it, will draw the role of public consumption in stimulating total demand, investment, production, employment, it increases the effectiveness of financial and monetary policy in achieving its goals, or a burden on the macroeconomics, represented by increasing the gap in total demand, imports, trade deficit, imported inflation and unemployment in case that local production does not respond to the increase in public consumption. And from here the study clarifies this economic problem by analyzing and demonstrating the behavior of Iraqi families according to the members and ages in consumption and their effect on increasing the economic burden on the decision-maker in the economic reform of Iraq.

How effective are mobility subsidies in targeting the unemployed? Lessons from the Swedish Model, 1965–1975

The Swedish Model on the labor market has been celebrated as a way to combine mobility with low unemployment and small wage gaps. As part of the model, relocation allowances were pioneered from the late 1950s. The program expanded thereafter and as much as 1% of the population in the high-unemployment north moved with assistance in the 1960s. Today, migration incentives are discussed to address pressing unemployment problems in Europe and the United States. What can Sweden’s experience tell us about the prospects of such programs? This article studies the usage of relocation allowances through a case study of Västernorrland County from 1965 to 1975. The analysis shows that there was a strong selection into the program by younger persons, recent graduates and from sectors with good employment prospects. The experience from Sweden highlights the difficulty of implementing programs to induce migration for those with the highest risk of unemployment.

Exploring unemployment differentials between former and non-former homeland areas in South Africa: A decomposition approach

ABSTRACT This study decomposes the unemployment rate gap between former and non-former homeland areas in South Africa. We apply the Oaxaca–Blinder [1973] decomposition technique to the 2011 population census community profiles at the main place level. Results indicate that former homeland areas suffer from relatively higher rates of unemployment compared to non-former homeland areas. The 24%-point difference is primarily explained by differences in former homeland area main place endowments. Interventions that improve educational attainment in former homeland areas and those that are sensitive to the labour market challenges faced by black South African youth and women are essential to alleviate the spatial gap.

Do the determinants of employment duration vary across employment spells?

ABSTRACT This paper looks at employment spells beyond the first, to check if multiple employment separations improve the matching of skills between workers and firms. We investigate whether the factors that are relevant for the first spell remain relevant for later spells. The results point to a range of outcomes. Certain variables such as the unemployment rate gap or part-time employment remain strong consistent predictors of the separation hazard across spells. In contrast, the coefficients of some variables such as the education or family status of the worker change sign and significance as the number of spells increases. This pattern is explained using a theoretical model that connects the cross-spell impact of a variable to its impact on the underlying distribution of the tendency to separate across workers. Variables associated with either a very low or a very high tendency to separate have an inconsistent effect across spells, because workers with a low tendency to separate do not appear in subsequent spells. Additionally, we find that the results vary across genders and generations. Classification codes: J00, C14, C12, C41.

Estimating the FOMC’s interest rate rule with variable selection and partial regime switching

AbstractWhen studying the Federal Open Market Committee’s (FOMC’s) interest rate rule, some authors, such as Gonzalez-Astudillo [(2018) Journal of Monetary, Credit, and Banking 50(1), 115–154.], find evidence for changes in inflation and output gap responses. Others, such as Sims and Zha [(2006) American Economic Review 96(1), 54–81.], only find evidence for a change in the variance of the interest rate rule. In this paper, I develop a new two-regime Markov-switching model that probabilistically performs variable selection and identification of parameter change for each variable in the model. I find substantial evidence that there have been changes in the FOMC’s response to the unemployment gap and in the volatility of the rule. When the FOMC responds strongly to the unemployment gap, I find a bimodal density for the inflation response coefficient. Despite the bimodal density, there is a low probability that there have been changes in the FOMC’s response to inflation.

An economical business-cycle model

AbstractThis article develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand–aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds on two unconventional assumptions. First, producers and consumers meet through a matching function. Thus, the model features unemployment, which fluctuates in response to aggregate demand and supply shocks. Secondly, wealth enters the utility function, so the model allows for permanent zero-lower-bound episodes. In the model, the optimal monetary policy is to set the interest rate at the level that eliminates the unemployment gap. This optimal interest rate is computed from the prevailing unemployment gap and monetary multiplier (the effect of the nominal interest rate on the unemployment rate). If the unemployment gap is exceedingly large, monetary policy cannot eliminate it before reaching the zero lower bound, but a wealth tax can.

Labor Market Indicator for Colombia

Although the unemployment rate is traditionally used to diagnose the current state of the labor market, this indicator does not reflect the existence of asymmetries, mobility costs, and rigidities which impede labor to freely flow over the business cycle. Thus, to get a better portrait of the momentum, we construct the Labor Market Indicator (LMI) focusing on the cyclical similarities of eighteen time series from the Colombian household, industrial, and opinion surveys between 2001 and 2019. Our indicator summarizes the growth cycle of the labor market and its evolution is closely related to the output and unemployment GAP. This indicator is useful for policy analysis as it is useful to forecast headline inflation, it also complements the diagnosis of the current momentum of the labor market, the general economic activity, and the characterization of economic phases and turning points.

Resolving Youth Marginalization and Unemployment Gap in Nigeria: The Role of Capacity Building

Resolving Youth Marginalization and Unemployment Gap in Nigeria: The Role of Capacity Building

Unemployment and aggregate stock returns

This paper presents new evidence on the predictability of aggregate stock market returns by a labor market based economic indicator–the unemployment gap–which is defined as the difference between the actual unemployment rate and its estimated trend. The unemployment gap emerges as a strong predictor of both raw stock returns and excess stock returns, in the U.S. and in international data. In addition, fluctuations in the unemployment gap are tightly linked to cyclical variation in risk preferences. A widening of the unemployment gap, i.e. a rise in the unemployment rate relative to its trend, is associated with a rise in risk aversion and higher excess returns. The results support the view that the expected equity risk premiums arise as a rational response of economic agents to changes in the investment opportunities.

Analytical study: Development potentials to specify the economic basis of Karbala Governorate - Iraq

The process of determining the economic basis of a governorate is achieved through studying the potentials and the resources hidden in that region, then analyze them with the help of tools in this field. One of these tools is the methodology of provincial unit average that is coincided to be one of the effective methods used in special analysis and studying the effectiveness of location in the governorates under study. The aims are to study and analyze the development potentials of the Karbala governorate regularities to determine the economic basis on which these regularities are based, in order to guide those regularities to reasonable development trends within their available potentials. This is achieved by activating and directing the potentials to correspond to the implicit potential in that place. It has been found that Karbala has many characteristics and neglected capabilities that can be promoted to provide the region with important products and job opportunities that help to bridge the unemployment gap that Iraq generally, and Karbala in particular. The strategic location of Karbala has an active role in providing many neighboring governorates with resources and capabilities that help their development and advancement to form an effective growth pole for the development of activities at the national level.

COVID-19 and Gaza: The Ideal Time to Establish a Medical Reserve Corps of Public Health Preventive Medicine Specialists.

COVID-19 and Gaza: The Ideal Time to Establish a Medical Reserve Corps of Public Health Preventive Medicine Specialists.

Skill development and employment opportunity from Chinese migrating ‘Geese’ in sub-Saharan Africa

Considering Chinese FDI in sub-Saharan Africa (SSA), the paper attempts to verify if the long-existing ‘flying geese’ paradigm (FGP) might be used to clarify the headway of Chinese migrating geese transmission of skills and job generation in SSA. Notably, since factory workers’ wages have increased in China, small but important migrating geese could, perhaps, be perceived as the vanguard of the flying geese – migrating to SSA to capitalize on those SSA nations with lower costs bases. As a result, the scientific task of this paper rests on answering three questions: Why do we have growing Chinese manufacturing activities in SSA? Are these new Chinese migrating geese bridging the unemployment gap and skills shortage? Also, since the Chinese migrating geese are moving to an environment where operations are cheaper, a third question is to specifically find out if the Chinese migrating geese are in Nigeria, and if they perceive local skills development and job creation to be a salient matter? Against this backdrop, the author argues that these Chinese migrating geese seem to contribute partly in transferring skills and job creation by standing-in as a worthwhile catalyst to upgrade the follower’s economy in the process of catching up a leader.

The Impact of Pandemics on Workforce Joblessness in Central Europe in pre-Covid Era and during Pandemic

Unemployment affects individuals socially, personally, and economically. The impact of being jobless can be long-lasting. Five different generations participate in the workplace today. As countries throughout the world went into lockdown to combat the spread of Covid-19, unemployment numbers rose rapidly. This study aimed to examine the effects of unemployment in three-generation groups in V4 and Austria in the pre-Covid-19 era and during Covid-19. Descriptive statistics were used to present the collected data. OECD data were used for the analysis. Based on the data collected, unemployment decreases with age. The group aged 15-24 shows significantly higher unemployment than the other two groups. A gender difference in unemployment was confirmed only in the Czech Republic and Slovakia. Unemployment has increased during the Covid-19 pandemic. The unemployment gap for females before and during Covid-19 was not confirmed. The T-Test confirmed the difference in unemployment before and during the crisis in the age categories 15-24 and 25-54. In Hungary, Poland, and Slovakia, the number of people with a duration of employment of up to one year differs in all age categories. In the Czech Republic, there is a significant difference only between the youngest group and the other two. In all countries, the largest number of people with the employment of up to one year is in the age group 25-54. In none of the examined countries was a gender unemployment gap proved before Covid-19.

Natural Unemployment and Activity Rates: Flow-Based Determinants and Implications for Price Dynamics

Motivated by the magnitude and cyclicality of transitions into and out of the labour force, we jointly estimate natural unemployment and participation rates through a forward-looking Phillips curve informed by structural labour market flows and demographic trends. We find that the estimated reaction of inflation to the participation gap is twice as large as that to the unemployment gap, and that the participation margin accounts for a significant share of total slack. Moreover, by exploiting a far-reaching and unexpected pension reform, we study the effects of a sudden expansion in labour supply that was not directly related to unemployment. The reform triggered a marked reduction in the employment to inactivity transitions of the elderly, determining an increase in natural participation (stronger than that in observed participation) but not in natural unemployment. Thus, the trends in activity explain in part why inflation has been so low in the recent years.

Policy Rules and Economic Performance

Debates about the conduct of monetary policy have evolved over time from “rules versus discretion” to “policy rules versus constrained discretion.” We propose a metric to evaluate monetary policy rules that are consistent with constrained discretion by calculating quadratic loss ratios, the (inflation plus unemployment) loss in high deviations periods divided by the loss in low deviations periods, with policy rules with higher loss ratios preferred to rules with lower loss ratios. The central results of the paper are (1) economic performance is better in periods of low deviations from policy rule prescriptions than in periods of high deviations from policy rule prescriptions for the vast majority of rules, and (2) rules with larger coefficients on the inflation gap than on the output gap are preferred to rules with larger coefficients on the output gap than on the inflation gap. These results are robust to policy lags between one and two years, different weights on inflation loss than on unemployment loss, various definitions of high and low deviations periods, fixed and time varying neutral real interest rates, fixed and time-varying inflation targets, and measuring economic slack by either the output gap or the unemployment gap. We conclude that (1) the Fed should “constrain” constrained discretion by following a rule that responds more strongly to inflation gaps than to output gaps and (2) this type of rule should be added to the Fed's semi-annual Monetary Policy Report.

Gender-based differences in Myanmar’s labor force

Gender-based differential treatment is an unquantified burden in Myanmar labour markets. Closing this literature gap, this paper uses the Labour Force Survey 2015 to provide the first study that performs an in-depth quantitative analysis of the gender gap. Besides outstanding descriptive facts, this paper adapts Oaxaca-Blinder decomposition into quantile linear models and, using Heckman corrections to adjust for unobservable skills, visualizes gender discrimination in Myanmar across seven facts. The first two facts show that Myanmar’s women labour force participation and unemployment rate gap is remarkably high among the region. However, the third fact reveals that both genders have a similar strategy to engage in the labour markets. Regarding the employed population, the fourth fact analyses the distribution of occupations and industries. It provides a first glance into the way the social norms and market dynamics create gender segregation in specific economic sectors. The fifth fact complements this landscape and statistically compares gender wage differences by education, location, age, sector, industry, and occupation. By doing so, it presents the demographic profiles that face higher gender gaps. The sixth fact decomposes the wage gap by quantiles making a case for glass ceilings and progressive pricing discrimination, both between and across industries and occupations. Finally, the seventh fact reflects over discrimination in the opportunities that women face to occupy different positions in their companies. Gender discrimination in the labour markets is a substantial barrier to the economic development of the countries. Hence, by identifying it, this paper aims to give quantitative support to the gender debate in the country, provides evidence-based suggestions for the country to improve each performance across the facts.

Time-varying wage Phillips curves in the euro area with a new measure for labor market slack

In recent years, the relationship between wage growth and the unemployment gap, known as the wage Phillips curve, has been puzzlingly weak: whereas the unemployment gap was low, wage growth was low as well. We consider two possible explanations for this ‘low wage growth puzzle’: (i) a structural change in the relationship between wage growth and labor market slack, and (ii) a failure of the unemployment gap to adequately capture labor demand conditions. We propose a new measure for labor market slack based on a survey among firms asking whether the shortage of labor is limiting production. This labor shortage indicator points to hidden slack not captured by the unemployment gap, which resolves the low wage growth puzzle. Our estimates of the wage Phillips curve for the five biggest euro area countries also suggest that the wage Phillips curve has changed over time, but not uniformly across countries.

Beveridgean unemployment gap

This paper develops a sufficient-statistic formula for the unemployment gap—the difference between the actual unemployment rate and the efficient unemployment rate. While lowering unemployment puts more people into work, it forces firms to post more vacancies and to devote more resources to recruiting. This unemployment-vacancy tradeoff, governed by the Beveridge curve, determines the efficient unemployment rate. Accordingly, the unemployment gap can be measured from three sufficient statistics: elasticity of the Beveridge curve, social cost of unemployment, and cost of recruiting. Applying this formula to the United States, 1951–2019, we find that the efficient unemployment rate averages 4.3%, always remains between 3.0% and 5.4%, and has been stable between 3.8% and 4.6% since 1990. As a result, the unemployment gap is countercyclical, reaching 6 percentage points in slumps. The US labor market is therefore generally inefficient and especially inefficiently slack in slumps. In turn, the unemployment gap is a crucial statistic to design labor-market and macroeconomic policies.

Monetary Policy and Unemployment—A Study on the Relationship Exists in the United States

This paper intends to make research on the relationship between monetary policy and unemployment of the United States from the first quarter of 1983 to the second quarter of 2018. Data is collected and later divided into two groups, namely an ex-crisis group and a post-crisis group, based on the event of the 2008 world financial crisis. This paper uses an extended version of the original Taylor’s rule by adding the concept of unemployment degree. The results suggest that in both periods, the unemployment gap degree does make a positive impact on the Fed interest rate and has a constantly significant impact on the Fed rate. As a result, Central Banks should adopt an easy monetary policy to stimulate the domestic economy from recession.