Hysteresis, Structural Shocks and Common Trends in Labor Market: Consequence for Ukraine
Hysteresis, Structural Shocks and Common Trends in Labor Market: Consequence for Ukraine

Summary/Abstract: This article provides an econometric analysis of the effects of technology shocks, labor demand shocks, labor supply shocks and wages shocks on the labor market in Ukraine. Structural vector autoregressive error correction model is formed on macroeconomic data for 2002-2014. The presence of hysteresis in unemployment is revealed. Three common trends are defined which determine the behavior of labor productivity, employment, unemployment rate and real wages. It is shown that only technological shocks have a positive long-term impact on productivity, although in the short run positive changes can be caused by positive shocks of wages and labor supply. The unemployment rate in the long run significantly reduces due to technological shocks and demand shocks, while supply shocks lead to its growth. Technological shocks and labor demand shocks are the source of positive change in the number of employed and real wages.

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