A further investigation of unemployment persistence in European transition economies

This paper analyses the dynamics of the unemployment rate in the eight countries from Central and Eastern Europe which joined the EU in 2004. Unit root tests allowing for nonlinearities and structural changes suggest that the unemployment rate is not stationary in most of the sample countries. Tests allowing for fractional integration, however, reveal that shocks are highly persistent, implying a slow rate of convergence to the natural rate of unemployment. The unemployment rate is least persistent in Hungary and Slovenia, more persistent in the Czech Republic, Slovakia and the Baltic States and extremely persistent in Poland. The degree of persistence appears to reflect the different levels of economic and institutional development in the countries and possibly also the role of the government. Journal of Comparative Economics 39 (4) (2011) 514-532. The University of Sheffield, Department of Economics, 9, Mappin Street, Sheffield S1 4DT, United Kingdom; University of Navarra, Faculty of Economics and Business Administration, Edificio Biblioteca, Entrada Este, E-31080 Pamplona, Spain; Tallinn University of Technology, Tallinn School of Economics and Business Administration, Akadeemia tee 3-486, 12618 Tallinn, Estonia; Eesti Pank, Estonia pst 13, 15095 Tallinn, Estonia. (C) 2011 Association for Comparative Economic Studies Published by Elsevier Inc. All rights reserved