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Natural and cyclical unemployment: A stochastic frontier decomposition and economic policy implications
Author(s) -
MartínRomán Ángel L.,
CuéllarMartín Jaime,
Moral Alfonso
Publication year - 2023
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12335
Subject(s) - unemployment , economics , frontier , econometrics , full employment , labour economics , distribution (mathematics) , work (physics) , estimation , aggregate demand , business cycle , macroeconomics , monetary policy , mathematics , mechanical engineering , mathematical analysis , archaeology , management , engineering , history
This work splits effective unemployment into two components: natural unemployment, and cyclical unemployment. For that purpose, an estimation of the stochastic cost frontier is performed. The study is focused on the 17 autonomous communities in Spain over the period 1982–2012. Results evidence greater importance of the natural component as the principal determinant of effective unemployment. When comparing these results with those obtained applying univariate filters, the distribution in the components of the effective unemployment changes, increasing the importance of cyclical unemployment. This result indicates that the policymakers should have a greater power to implement aggregate demand policies.