THE CAUSES OF SPANISH UNEMPLOYMENT - A STRUCTURAL VAR APPROACH

In this paper, we review the main causes of Spanish unemployment and w eight them by estimating a simple macroeconomic model using the struct ural VAR methodology. By using this methodology we associate different causes of unemployment with shocks of different nature which have lon g-lasting effects due to full hysteresis. We claim that such an extrem e assumption on 'state dependency' is reasonable, at least as a local approximation, for the period and the economy at hand. Our results sug gest that the combination of a plausible mixture of different types of shock and extreme persistence in their propagation mechanisms can sat isfactorily explain the dismal performance of the Spanish labour marke t during the last two decades. (C) 1997 Elsevier Science B.V.