Hysteresis In Unemployment: Panel Unit Roots Tests Using State Level Data

Document Type



Published in the Journal of Business and Economics Research, volume 6 issue 2, 2008. Bryant users may access this article here.

Publication Source

Journal of Business and Economic Research


Most studies that use classical unit-root tests in OECD countries support the unemployment hysteresis hypothesis. However, similar classical tests performed on US data yield mixed results, uncovering specification issues. This study uses a number of panel unit root tests, which are known to overcome specification problems, to check the existence of hysteresis in unemployment data from three Massachusetts regions. The empirical results strongly reject a unit root in the unemployment rates, refuting the unemployment hysteresis hypothesis.