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Asymmetries in the cyclical behaviour of UK markets

By Daron Acemoglu and Andrew Scott

Abstract

Using a simple state-space approach, this paper documents widespread non-linearities in the UK labour market and shows that these non-linearities can be successfully modeled using the notion of cyclical asymmetries. The economy is shown to display qualitative differences and the impulse response function of variables such as employment, unemployment, real and nominal wages are shown to crucially depend on the state of the business cycle. We show that in most cases conditioning on the state of the cycles removes residual non-linearity otherwise detected. Therefore it is a measure of the state of the cycle rather than the growth rate of output per se that is most important in explaining labour market non-linearities. The robustness of our findings is confirmed using a variety of diagnostics and estimators

Topics: HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1993
OAI identifier: oai:eprints.lse.ac.uk:20962
Provided by: LSE Research Online
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