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Reza Moghadam is an Economist in the European I Department and holds a Ph.D. from Warwick University. Caroline Van Rijckeghem is an Economist in the Research Department and holds a Ph.D. from the University of California at Berkeley. This paper was written while she was in the Fiscal Affairs Department. The paper is a condensed version of Moghadam and Van Rijckeghem (1994). The authors would like to thank, without implication, Ke-Young Chu, Paul Masson, and the researchers at the National Bank of Belgium for helpful comments and suggestions.
Mulkay and Van Audenroae (1993) show that the Belgian labor market is characterized by a low rate of employment growth.
The short-term and long-term unemployment variables only exist from 1987:1. The earlier data were interpolated from annual observations.
This test is strictly valid only if labor demand follows a random walk.
All the equations fail the normality test and the Lagrange multiplier test for serial correlation. Equations (3) and (5) also fail Ramsey’s test for functional form.
We found that all the variables appearing in Table 2 were nonstationary; in fact, they were all integrated of order one. The long-run equation is estimated using ordinary least squares (OLS).
We also tested for cointegration of SUR and LUR. This was rejected.
The aggregate wage variable, wagg, was left out of these regressions because of collinearity with LTU.
Reforms along the following lines may have been put in place after the paper was written.
Some payroll tax reductions for the young have been put into effect since this paper was written.
Under this law the Government can suspend indexation if competitiveness deteriorates significantly.