Home/Working Papers/Hysteresis vs. NAIRU and Convergence vs. Divergence: The behavior of regional unemployment rates in Brazil
Hysteresis vs. NAIRU and Convergence vs. Divergence: The behavior of regional unemployment rates in Brazil
Código: WPE – 081
Fábio Augusto Reis Gomes
Cleomar Gomes da Silva
This paper aims to analyze the behavior of regional unemployment in Brazil. Firstly, we use unit root tests with structural breaks to examine which theoretical framework, hysteresis or NAIRU, is more suitable to explain unemployment dynamics in six Brazilian metropolitan areas – São Paulo, Rio de Janeiro, Belo Horizonte, Porto Alegre, Salvador and Recife – and at the national level as well. Hysteresis is found in all series, except in Rio de Janeiro, which indicates a high persistence in the Brazilian regional unemployment. Secondly, we investigate whether the five metropolitan regions characterized by the hysteresis effect show evidence of stochastic convergence. The latter is not found in Porto Alegre’s unemployment rate only.