Panel Causality and Cointegration between Productivity and Unemployment
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Panel Causality and Cointegration between Productivity and Unemployment
Applied Economics Quarterly, Vol. 61 (2015), Iss. 2 : pp. 141–153
3 Citations (CrossRef)
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Center for Globalization and Governance, Nova School of Business and Economics, 1099-032 Lisboa, Portugal.
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Abstract
This paper empirically investigates the link between productivity and unemployment in a panel of 19 OECD countries between 1970 and 2010. By means of recently developed panel data econometric methods, we find that unemployment and productivity are non-stationary in levels and they are cointegrated for the panel as a whole. In terms of causality, the stronger directional relationship runs from unemployment to productivity. Furthermore, the long-run effect seems to be generally positive, therefore favouring of those theories which suggest that prolonged recessions foster long-run productivity improvements.
JEL Classification: C32, E32, J21, O40, O57