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Determinants of structural unemployment in Colombia: a search approach

  • Luis E. Arango
  • Luz A. Flórez
Article
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Abstract

We provide evidence of the structural unemployment rate determinants in Colombia between 1984 and 2015. In the first stage, we estimate different measures of this variable including the ones that emerge from the search-theoretic, the Phillips curve and a structural vector autoregressive model. Next, by using a fully modified ordinary least squares cointegration approach, we test the determinants in the Colombian case following the search model guidelines. Accordingly, the main explanations of the structural unemployment rate are the real minimum wage, the real interest rate, a hiring cost indicator, sectoral shifts, non-wage labour costs and some demographic factors such as the proportion of workers with no college education. Finally, we use these variables to estimate a new measure of the structural unemployment rate called the true structural unemployment rate.

Keywords

Search model Structural unemployment rate Vacancy rate Hiring cost indicator 

JEL Classification

E24 J30 J40 

Notes

Acknowledgements

The opinions expressed here are not necessarily those of either the Banco de la República or its Board of Directors. The authors, the ones responsible for any remaining errors, acknowledge the valuable comments and suggestions of the two anonimous referees. They also thank the help of Banco de la República headed by Dora Mora for keeping up-to-date the job vacancies used in the work, and the excellent research assistance of Oscar Arenas and Maria Paula Medina. Helpful discussions with Hernando Vargas and the suggestions of Andrés Álvarez and the participants at Internal Research Seminar of the Banco de la República are also greatly acknowledged.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Research UnitBanco de la República (Central Bank of Colombia)BogotáColombia

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