Abstract
This paper applies panel unit-root tests that allow for structural breaks and cross-sectional dependence to examine the validity of hysteresis in gender unemployment rates and gender unemployment gap for a panel of 15 European countries. Addressing breaks, there is evidence to reject the null hypothesis of hysteresis for the unemployment rates and unemployment gap series. Allowing for both cross-sectional dependence and heterogeneous structural breaks, this result is reverted, and we fail to reject the null hypothesis of unit root.
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Notes
This test depends only on the number of breaks in the series and, therefore, has significantly greater power than all previous panel tests (Im et al. 2010).
The main advantage of this panel unit root test is that it allows for individual deterministic effects, heterogeneity in the autoregressive coefficients, heterogeneous structural breaks, and lag lengths in the underlying equation and therefore controls for possible country heterogeneity in the panel of EU countries. For a recent survey on the literature on panel unit root tests, see among others, Breitung and Pesaran (2008).
The estimated critical values for the means and variances of \( \overline{t} \) are provided in Table 3 of Im et al. (2010).
The analysis is restricted to this period in order to have a balanced data set, as annual data for gender unemployment series prior to 1977 are not available for all EU-15 countries.
The 15 EU countries used are the following: Austria (AU), Belgium (BG), Denmark (DK), Finland (FI), France (FR), Germany (DE), Greece (GR), Ireland (IR), Italy (IT), Luxembourg (LU), Netherlands (NL), Portugal (PR), Spain (SP), Sweden (SW), United Kingdom (UK).
The lag order of the tests is selected using the recursive t-statistic procedure with an upper bound of k max = 4. All tests are based on a specification of the test equation with individual fixed effects at the 5 % level of significance.
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Acknowledgments
The authors are grateful to Professor Junsoo Lee for providing the GAUSS program codes. The first author would like to thank the Greek State Scholarships Foundation (IKY) for its financial support. The views expressed in this paper are those of the authors and not those of their respective institutions.
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Bakas, D., Papapetrou, E. Unemployment by Gender: Evidence from EU Countries. Int Adv Econ Res 20, 103–111 (2014). https://doi.org/10.1007/s11294-013-9423-2
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DOI: https://doi.org/10.1007/s11294-013-9423-2