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S.G.B. Henry is in the Department of Applied Economics at the University of Cambridge; at the time of writing he was an Advisor in the European I Department. The authors are grateful to David T. Coe, George Sheldon, and Hari Vittas for helpful comments and suggestions. However, the authors remain responsible for the full content of the paper.
The ratio of the percent change in employment to the percent change in real GDP peaked at 3 in the second quarter of 1976, as compared to 8.5 in the second quarter of 1992.
Employment statistics may also fail to provide an accurate picture of labor market developments. The difficulties stem from the data collection methodology employed. Every five years, population and company employment censuses are taken. Between censuses, an employment index is used to extrapolate the number of employed. This method worked well during the 1970s; but during the 1980s, when the extrapolated series were compared to the 1985 census, the former predicted a considerably lower level of employment. An analysis of this discrepancy revealed that the shortfall of the extrapolated series is attributable to the failure of the employment index to record the strong increase in employment in the service sector. This suggests that the extrapolation method may overestimate the magnitude of cyclical declines in employment. There is consequently some concern that the observed sharp decline in employment in the recession of the early 1990s may be somewhat exaggerated (Sheldon (1993)).
During the 1975-76 recession, approximately 410,000 workers lost their jobs. Of this total about 211,000 were foreign workers who left Switzerland without ever registering as unemployed. Of the jobless workers remaining, only 7 percent registered as unemployed, while the other withdrew from the labor market. In contrast, during the 1982 recession, employment declined by about 92,000 workers; about one-third- of these workers were foreign and left Switzerland; and of the remaining jobless, about 25 percent registered as unemployed. See Projer (1993) and Sheldon (1988).
Another consequence of granting permanent resident status to low-skilled foreign workers is that these workers are more likely to become and remain unemployed during a downturn. In 1993, foreign workers accounted for 25 percent of the employable population, but represented 40 percent of the unemployed.
See OECD (1993).
For example, to qualify for unemployment benefits in Switzerland, an individual must have worked at least 6 months over the last two years; this amounts to a contribution period of one-fourth (6/24). In contrast, the contribution period in Germany and France is one-third and one-half, respectively. The minimum payment duration is also longer in Switzerland than in the other countries in the sample (Sheldon (1993)).
This finding is consistent with evidence from other OECD countries in which the impact of unemployment benefits, where significant, tends to be modest in size. See, for example, Adams and Coe (1990), and Calmfors (1990).
Using a Lorenz curve, a Gini coefficient is calculated for each quarter. The Lorenz curve is obtained by ranking the cantons according to the number of unemployed and drawing a diagram of their accumulated shares in the total number of employed and the total number of unemployed.
See Nickell and Andrews (1983).
The real exchange rate is actually the inverse of the competitiveness indicator which is used by Layard, Nickell, and Jackman (1991).
Tests such as the Dickey-Hasza-Fuller (DHF) test are appropriate for this. On the basis of this, both prices and wages appear to be I(1,1), as the estimated ADF(4) statistics are -6.3 and -4.8 respectively (compared with a 95 percent cut-off value of -4.46).
The Eigenvalue test results are as follows: r ≥ 1 = 38.0 as compared to a critical value of 28.7; and r ≥ 2 = 11.2 as compared to a critical value of 17.9.
The Eigenvalue test result is r ≥ 2 = 25.76 as compared to a critical value of 19.9.
Based on average values of the right hand side variables for the period 1975Q4-1989Q4, this methodology yields an historical estimate of the NAIRU of 0.16 percent, which is largely consistent with other estimates for this period, see OECD (1993). Other estimates reported in OECD (1994) give much larger values for the NAIRU for the recent past. These are based on very different methodologies however. For example, one estimate using a Hodrick-Prescott filter, gives 3.1 percent for the NAIRU in 1993. The drawback with this estimate is that it is largely determined by the movement in actual unemployment itself.