Hysteresis and sources of aggregate employment inertia

• Type: Article in International Scientific Journal
• Date: 2022

Authors

Mota P.R. (Author) FEP; vasconcelos, pb (Author) FEP

Journal

Title: Studies in Nonlinear Dynamics and Econometrics

Vol. 26 No. 1

Pages: 137-154

ISSN: 1081-1826

Publisher: Walter De Gruyter

Indexing

ISI Web of Knowledge - 1 Citation

Scopus - 1 Citation

Other information

Authenticus ID: P-00T-6NS

DOI: 10.1515/snde-2019-0135

Abstract (EN): It is widely recognized that aggregate employment dynamics is characterized by hysteresis. In the presence of hysteresis, the long run level of employment instead of being unique and history-independent, depends on the adjustment path that is taken, which includes the monetary and fiscal measures. It is thus important to study the presence of hysteresis in the macrodynamics of employment to understand whether the recession followed 2007s financial crisis will have permanent effects, and prospectively to conduct fiscal and monetary policies. The main contribution of this paper is to analyse the relative impact of the main sources hysteresis (non-convex adjustment costs, uncertainty and the flexibility of working time arrangements) to the width of the employment band of inaction. For that purpose, a switching employment equation was estimated from a computational implementation of the linear play model of hysteresis. From our results we found significant hysteresis effects in the aggregate employment dynamics caused by the presence of non-convex adjustment costs as uncertainty. We also found that the flexibility firms may have to adjust labour input by varying the number of hours of work per employee helps to mitigate the effect of uncertainty upon the band of inaction. © 2020 Walter de Gruyter GmbH, Berlin/Boston 2020.

Language: English

Type (Professor's evaluation): Scientific