Productivity Shocks, Unemployment Persistence, and the Adjustment of Real Wages in OECD Countries

This paper applies a set of unit root and cointegration tests with non-linear error-correction mechanisms to a subset of the OECD countries to investigate the empirical conclusions of some of the labor market models in the literature. I generally find that the unemployment rate, productivity, and real wages have a unit root even if one controls for threshold effects. This finding justifies the use of a cointegration approach to assess the existence of a long-run equilibrium among the variables of interest. For roughly half of the OECD countries in the sample, the unemployment rate, real wages, and productivity trend together over time. For four countries (i.e, Germany, Japan, Sweden, and the US) the adjustment to the long run relationship appears mostly asymmetric. Also, an impulse response function analysis suggests that real wages and productivity adjust faster to the long-run equilibrium, while shocks to unemployment take longer to extinguish. Also, according to the sign of the shocks, the unemployment rates respond differently. These findings suggest that a proper analysis of the behavior of productivity, real wages, and unemployment should consider non-linear adjustment mechanisms to long-run equilibrium since a liner approach would be biased.Unemployment, Wages; Collective bargaining; Hysteresis

Unit Roots Tests with Smooth Breaks: An Application to the Nelson-Plosser Data Set

This paper reconsiders the nature of the trends (i.e. deterministic or stochastic) in macroeconomic time series. For this purpose, the paper employs two new tests that display robustness to structural breaks of unknown forms, irrespective of the date and/or location of the breaks. These tests approximate structural changes as smooth processes via Flexible Fourier transforms. The tests deliver strong evidence in favor of a nonlinear deterministic trend for real GNP, real per capita GNP, employment, the unemployment rate, and stock prices. Further, the two tests confirm the existence of stochastic trends in nominal GNP, consumer prices, real wages, monetary aggregates, velocity, and bond yields. In general, it appears that real variables are stationary while nominal ones have a unit root.Unit Roots, Stationarity Tests, Structural Change

Recruitment of Seemingly Overeducated Personnel: Insider-Outsider Effects on Fair Employee Selection Practices

We analyze a standard employee selection model given two institutional constraints: First, professional experience perfectly substitutes insufficient formal education for insiders while this substitution is imperfect for outsiders. Second, in the latter case the respective substitution rate increases with the advertised minimum educational requirement. Optimal selection implies that the expected level of formal education is higher for outsider than for insider recruits. Moreover, this difference in educational attainments increases with lower optimal minimum educational job requirements. Investigating data of a large US public employer confirms both of the above theoretical implications. Generally, the econometric model exhibits a �good fit�.employee selection, overeducation, adverse impact, insiders vs outsiders

Unit Roots Tests with Smooth Breaks: An Application to the Nelson-Plosser Data Set

This paper reconsiders the nature of the trends (i.e. deterministic or stochastic) in macroeconomic time series. For this purpose, the paper employs two new tests that display robustness to structural breaks of unknown forms, irrespective of the date and/or location of the breaks. These tests approximate structural changes as smooth processes via Flexible Fourier transforms. The tests deliver strong evidence in favor of a nonlinear deterministic trend for real GNP, real per capita GNP, employment, the unemployment rate, and stock prices. Further, the two tests confirm the existence of stochastic trends in nominal GNP, consumer prices, real wages, monetary aggregates, velocity, and bond yields. In general, it appears that real variables are stationary while nominal ones have a unit root

Recruitment of Overeducated Personnel: Insider-Outsider Effects on Fair Employee Selection Practices

employee selection, overeducation, adverse impact, insiders vs outsiders

Productivity Shocks, Unemployment Persistence, and the Adjustment of Real Wages in OECD Countries

This paper applies a set of unit root and cointegration tests with non-linear error-correction mechanisms to a subset of the OECD countries to investigate the empirical conclusions of some of the labor market models in the literature. I generally find that the unemployment rate, productivity, and real wages have a unit root even if one controls for threshold effects. This finding justifies the use of a cointegration approach to assess the existence of a long-run equilibrium among the variables of interest. For roughly half of the OECD countries in the sample, the unemployment rate, real wages, and productivity trend together over time. For four countries (i.e, Germany, Japan, Sweden, and the US) the adjustment to the long run relationship appears mostly asymmetric. Also, an impulse response function analysis suggests that real wages and productivity adjust faster to the long-run equilibrium, while shocks to unemployment take longer to extinguish. Also, according to the sign of the shocks, the unemployment rates respond differently. These findings suggest that a proper analysis of the behavior of productivity, real wages, and unemployment should consider non-linear adjustment mechanisms to long-run equilibrium since a liner approach would be biased

Productivity Shocks, Unemployment Persistence, and the Adjustment of Real Wages in OECD Countries

This paper applies a set of unit root and cointegration tests with non-linear error-correction mechanisms to a subset of the OECD countries to investigate the empirical conclusions of some of the labor market models in the literature. I generally find that the unemployment rate, productivity, and real wages have a unit root even if one controls for threshold effects. This finding justifies the use of a cointegration approach to assess the existence of a long-run equilibrium among the variables of interest. For roughly half of the OECD countries in the sample, the unemployment rate, real wages, and productivity trend together over time. For four countries (i.e, Germany, Japan, Sweden, and the US) the adjustment to the long run relationship appears mostly asymmetric. Also, an impulse response function analysis suggests that real wages and productivity adjust faster to the long-run equilibrium, while shocks to unemployment take longer to extinguish. Also, according to the sign of the shocks, the unemployment rates respond differently. These findings suggest that a proper analysis of the behavior of productivity, real wages, and unemployment should consider non-linear adjustment mechanisms to long-run equilibrium since a liner approach would be biased

The Role of CETA on Carbon Dioxide, F-Gasses, Methane, and Nitrous Oxide

This study empirically investigates how the presence of CETA (Comprehensive Economic and Trade Agreement) may affect per capita emissions of four air pollutants. It follows closely the empirical work of (Qirjo et al., 2019), but it focuses in each category of GHGs. It finds statistically significant evidence suggesting that trade openness between the EU and Canada could help reduce per capita emissions of CO2, CH4, and N2O in a typical CETA member, respectively. In the case of CO2, the presence of CETA may help reduce per capita emissions in almost all CETA members. However, there is empirical evidence that suggests that per capita emissions of CH4 could move from the EU towards Canada due to the implementation of CETA. There is also empirical evidence implying that there could be a shift of emissions per capita of N2O from Canada towards 8 former EU members due to the implementation of CETA. There is mainly statistically insignificant evidence of a positive relationship between the trade intensity of each EU member and Canada and per capita emissions of HFCs/PFCs/SF6. Furthermore, the study reports unambiguous empirical evidence in support of the Pollution Haven Hypothesis originating from national population density variations (PHH2) for Canada, in the case of CH4. Moreover, there is also clear evidence consistent with the Pollution Haven Hypothesis due to national income differences (PHH1) for 8 former Communist EU members, in the cases of N2O and HFCs/PFCs/SF6

The Role of TTIP on Other than CO2 Air Pollutants

We empirically investigate the impacts of the implementation of the Transatlantic Trade and Investment Partnership (TTIP) on per capita emissions of eight air pollutants and municipal waste. We employ the same explanatory variables and apply the same empirical strategy and methodologies as in (Qirjo and Pascalau, 2019). We provide robust evidence suggesting that the implementation of TTIP could be beneficial to the environment because it may help reduce per capita emissions of NO2 and HFCs/PFCs/SF6 in a typical TTIP member. This result is based on the statistically significant evidence showing that, on average, the pollution haven motive based on national per capita income variations is dominated by the Factor Endowment Argument based on the classical Heckscher-Ohlin trade theory and the pollution haven motive originating from an inverse measurement of national population density differences. However, we also report generally statistically significant evidence implying that the implementation of TTIP could denigrate the environment because it may help increase per capita emissions of SO2, SOx, NOx, SF6, and NH3

TTIP and the Environmental Kuznets Curve

This paper uses data on emissions per capita of ten air pollutants and municipal waste to investigate the potential impact of the Transatlantic Trade and Investment Partnership (TTIP) on the empirical validity of the Environmental Kuznets Curve (EKC). Using a dataset of the twenty-eight EU members and of the U.S. over a twenty-five year period, the results in this paper provide robust and statistically significant evidence consistent with the EKC argument for CO2, CH4, and HFCs/PFCs/SF6, respectively. Further, the paper finds a monotonically increasing relationship between income per capita and emissions per capita in the cases of GHGs, SF6, and NO2, respectively. In addition, this paper finds that the EKC’s turning point values of each pollutant are sensitive to the econometric approach and/or to the employed control variables. Finally, the study reports statistically significant evidence suggesting a U-shaped relationship between emissions per capita of SO2 or SOx and income per capita