The OECD Beveridge Curve: technological progress, globalisation and institutional factors

Abstract

This paper tests the existence of a Beveridge Curve across the economies of nineteen OECD countries from 1980 to 2007, investigating the impact of technological progress and globalisation on the unemployment-vacancies trade-off. We find largely favourable evidence for the existence of a OECD Beveridge Curve. Lagged values of technological progress (R&D intensity) shift the Curve outwards, producing evidence in support of the creative destruction effect. Lagged values of a globalisation index also shift the Curve outwards, worsening the unemployment-vacancies trade-off. On the other hand, capital per worker shifts the Curve inwards both in the short and in the long run. Significant institutional variables include coordination bargaining, and, less consistently, unemployment benefits or employment protection. Including in the Curve structural indicators (such as technological progress and globalisation) as well as institutional variables is needed to obtain a satisfactory specification.

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Fig. 1

Notes

  1. 1.

    This point is dealt at length in Destefanis and Fonseca (2004). See also Entorf (2003).

  2. 2.

    See for example IMF (1996) and OECD (1997).

  3. 3.

    See also Nickell and Layard (1999) and Booth et al. (2000).

  4. 4.

    Here too there is of course some heterogeneity. Globalisation increases a lot for Austria and Spain; technological progress increases briskly in Japan and at a slightly slower pace in Austria, Belgium and Portugal.

  5. 5.

    Under error homoscedasticity, the structure of the first-difference model ensures that an asymptotically equivalent estimator can be obtained in one step. Moreover, simulations suggest very small efficiency gains from using the two-step model, even in the presence of sizeable heteroscedasticity, and a high dependence of the two-step weight matrix on estimated parameters. Hence we adopt a one-step approach throughout this paper.

  6. 6.

    Too many instruments can overfit endogenous variables and fail to expunge their endogenous components. Thus, we have to beware of taking comfort in a Hansen test p-value below 0.1, whereas higher values, such as 0.25, may represent a problem.

  7. 7.

    We are indebted to an anonymous referee for pointing out this possibility to us.

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Correspondence to Sergio Destefanis.

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Destefanis, S., Mastromatteo, G. The OECD Beveridge Curve: technological progress, globalisation and institutional factors. Eurasian Bus Rev 5, 151–172 (2015). https://doi.org/10.1007/s40821-015-0019-z

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Keywords

  • Unemployment
  • Vacancies
  • Capitalisation effect
  • Creative destruction
  • Labour-market institutions