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Working Paper

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Employment (Economic theory), Unemployment, Hysteresis (Economics) -- Latin America -- 1980-2005


This paper tests the hysteresis hypothesis in unemployment for 13 Latin American countries covering the period 1980-2005. The tests exploit the time series and the cross sectional variation of the series, and allows for cross section dependence and a different number of endogenously determined structural breakpoints. The findings give support to the hysteric dynamic hypothesis for the majority of the countries analyzed. The implications of the results have ramifications regarding macro-stabilization, structural reform, and the design of social safety protection.


Working Paper: OVE/WP-04/08, published by Inter-American Development Bank, Washington, D.C.

A version of this paper was subsequently published in the Journal of International Development, Volume 24, Issue 4, May 2012 , Pages 448–466. Available at

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