Multiple shifts and fractional integration in the us and uk unemployment rates

This paper analyses the long-run behaviour of the US and UK unemployment rates by testing for possibly fractional orders of integration and multiple shifts using a sample of over 100 annual observations. The results show that the orders of integration are higher than 0 in both series, which implies long memory. If we assume that the underlying disturbances are white noise, the values are higher than 0.5, i.e., nonstationary. However, if the disturbances are autocorrelated, the orders of integration are in the interval (0, 0.5), implying stationarity and mean-reverting behaviour. Moreover, when multiple shifts are taken into account, unemployment is more persistent in the US than in the UK, implying the need for stronger policy action in the former to bring unemployment back to its original level

Tests of alternative wage-employment bargaining models with an application to the UK aggregate labour market

In this paper we propose a test that discriminates among alternative models of bargaining for wages and employment. The test rests on a theoretical framework which encompasses both the labour demand and the efficient bargain models of wage and employment determination. It is based on testing the cross equation restrictions implied for the coefftcients of union power variables in reduced form wage and employment equations. The test is illustrated for the Layard and Nickel1 model of the aggregate UK labour market, for which it is found that one can reject both the labour demand model and the hypothesis that wage employment bargains are efficient, in favour of a generalised model of inefficient bargaining for wages and employment. 1