Unemployment in an Interdependent World



36


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

u*

0.072a

0.067b

0.083a

0.088a

0.071a

0.077a

0.139a

0.138a

0.119a

0.133a

(0.028)

(0.030)

(0.029)

(0.032)

(0.025)

(0.028)

(0.032)

(0.039)

(0.026)

(0.030)

u* × k* /k

0.049b

0.162a

0.056b

0.145

(0.023)

(0.094)

(0.023)

(0.120)

k*/k

-1.010a

-1.622a

-0.986a

-1.536b

(0.248)

(0.484)

(0.241)

(0.651)

b

0.091a

0.085a

0.098a

0.092a

0.104a

0.075a

0.100a

0.085a

0.102a

(0.019)

(0.020)

(0.019)

(0.018)

(0.017)

(0.020)

(0.022)

(0.017)

(0.019)

PMR

0.745a

0.878a

0.948a

0.774a

0.868a

0.917a

0.927a

0.789a

0.880a

(0.198)

(0.212)

(0.203)

(0.187)

(0.175)

(0.214)

(0.214)

(0.183)

(0.170)

High corporatism

-1.739a

-1.615a

-1.827a

-1.581a

-1.810a

-1.616a

-1.712a

-1.597a

-1.693a

(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

-0.620a

-0.646a

-0.632a

-0.621a

-0.611a

-0.621a

-0.609a

-0.624a

-0.615a

-0.620a

-0.618a

(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

0.423a

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 α
1 = α2 = 1, and δ = 1. In IV regressions, the foreign unemployment rate u* is instrumented by b*-1,PMR*-1
and 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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