A Simple Nonlinear Dynamic Model for Unemployment: Explaining the Spanish Case

João Ricardo Faria, Miguel A. León-Ledesma
2008 Discrete Dynamics in Nature and Society  
Spanish unemployment is characterized by three distinct regimes of low, medium, and high unemployment and by a fast transition between them. This paper presents a simple nonlinear dynamic model that is able to explain this behavior with multiple equilibria and jumps describing the transition between equilibria. The model has only a small number of parameters capturing the fundamentals of labor markets and macroeconomic and institutional factors. The model is capable of generating unemployment
more » ... namics that encompass the "unique" natural rate hypothesis, the structuralist hypothesis, and the hysteresis hypothesis.
doi:10.1155/2008/981952 fatcat:5jaqnepouzc6pdej36bloe6lnm