Abstract:

The impact of temporary shocks on unemployment rates in literature is tested by the Unemployment Hypothesis and the Natural Unemployment Rate Hypothesis. According to the Unemployment Hypothesis, the temporary shocks in the country’s economies have a permanent impact on the unemployment rate. According to the Natural Unemployment Rate Hypothesis, the impact of temporary shocks on the unemployment rate is not permanent. The unemployment rate after a long-term shock could return to its old level. Effective employment policies are needed to reduce the unemployment rate in the presence of the hysteric effect. In this study, for the period 1991-2017, it was intended to test the validity of the Unemployment Hypothesis in the Higher-Middle Income Countries. The validity of this hypothesis was studied by the First Generation Panel Unit Root Analysis. According to the Panel Unit Root Test results, the total unemployment rate and youth unemployment rate data in the highest middle-income countries for the period 1991-2017 are standing at their own levels. Unemployment Hypothesis is not valid in these countries where the series do not contain a unit root, but the Natural Unemployment Rate Hypothesis is valid. In other words, the impact of crises in the country’s economies on unemployment is not permanent.

Keywords: