Unemployment in an Interdependent World

Table 1: The role of foreign unemployment

Dep.var.: level of unemployment rate		(2) OLS	(3) IV	(4) OLS	(5) IV	(6) OLS	(7) IV	(8) OLS	(9) IV	(10) OLS	(11) IV
	(1) OLS	(2) OLS	(3) IV	(4) OLS	(5) IV	(6) OLS	(7) IV	(8) OLS	(9) IV	(10) OLS	(11) IV
u^*		0.072^a	0.067^b	0.083^a	0.088^a	0.071^a	0.077^a	0.139^a	0.138^a	0.119^a	0.133^a
		(0.028)	(0.030)	(0.029)	(0.032)	(0.025)	(0.028)	(0.032)	(0.039)	(0.026)	(0.030)
u^* × k^* /k								0.049^b	0.162^a	0.056^b	0.145
								(0.023)	(0.094)	(0.023)	(0.120)
k^*/k								-1.010^a	-1.622^a	-0.986^a	-1.536^b
								(0.248)	(0.484)	(0.241)	(0.651)
b	0.091^a			0.085^a	0.098^a	0.092^a	0.104^a	0.075^a	0.100^a	0.085^a	0.102^a
	(0.019)			(0.020)	(0.019)	(0.018)	(0.017)	(0.020)	(0.022)	(0.017)	(0.019)
PMR	0.745^a			0.878^a	0.948^a	0.774^a	0.868^a	0.917^a	0.927^a	0.789^a	0.880^a
	(0.198)			(0.212)	(0.203)	(0.187)	(0.175)	(0.214)	(0.214)	(0.183)	(0.170)
High corporatism	-1.739^a			-1.615^a	-1.827^a	-1.581^a	-1.810^a	-1.616^a	-1.712^a	-1.597^a	-1.693^a
	(0.412)			(0.420)	(0.394)	(0.367)	(0.353)	(0.407)	(0.387)	(0.357)	(0.379)
Union density	-0.001			-0.004	-0.005			-0.013	0.004
	(0.023)			(0.023)	(0.022)			(0.026)	(0.028)
EPL	-0.193			-0.419	-0.314			-0.506	-0.180
	(0.340)			(0.367)	(0.351)			(0.375)	(0.425)
gap	-0.620^a	-0.646^a	-0.632^a	-0.621^a	-0.611^a	-0.621^a	-0.609^a	-0.624^a	-0.615^a	-0.620^a	-0.618^a
	(0.044)	(0.046)	(0.044)	(0.044)	(0.039)	(0.040)	(0.035)	(0.043)	(0.039)	(0.038)	(0.034)
* gap^*				0.024	0.067	0.020	0.060	0.148	0.423^a	0.151	0.387
				(0.075)	(0.070)	(0.072)	(0.067)	(0.100)	(0.218)	(0.100)	(0.285)
2nd stage statistics
RMSE	1.134	1.234	1.139	1.129	1.010	1.168	1.061	1.106	0.998	1.145	1.062
adj. R²	0.930	0.917	0.919	0.931	0.935	0.926	0.929	0.934	0.937	0.929	0.929
F	146.7	125.2		147.4		155.4		134.2		139.1
1st stage statistics (p-values)
partial R²(u^*)			0.757		0.752		0.777		0.6801		0.7561
partial R² (u^* × k^* /k)									0.0636		0.0239
χ²-overidentification			0.889		0.792		0.220		0.356		0.437
χ²-endogeneity			0.727		0.947		0.833		0.432		0.542
Robust standard errors in parentheses,^ap <		0.01,^b p	< 0.05,^c p	< 0.1. :	Number of observations: 397			in OLS and 374 in		IV regressions. All

regressions contain a full set of country fixed-effects, year dummies, and an array of orthogonal shocks (TFP, terms of trade, real interest rate,
and labor demand shocks) as additional controls for business cycle comovements. Trade-weighted averages for foreign variables (denoted by
asterisks) are computed using α₁ = α₂ = 1, and δ = 1. In IV regressions, the foreign unemployment rate u* is instrumented by b*_-1,PMR*_-1and gap*_-1. The χ²-endogeneity test tests the null that u* is exogenous (and rejects in all presented IV models). Overidentification is tested
for using the Wooldridge robust Score test (invalidity of instruments or model misspecification is rejected in all presented IV models).

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Unemployment in an Interdependent World

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