A simple nonlinear dynamic model for unemployment: Explaining the spanish case (Q937032)

Summary: Spanish unemployment is characterized by three distinct regimes of low, medium, and high unemployment and by a fast transition between them. This paper presents a simple nonlinear dynamic model that is able to explain this behavior with multiple equilibria and jumps describing the transition between equilibria. The model has only a small number of parameters capturing the fundamentals of labor markets and macroeconomic and institutional factors. The model is capable of generating unemployment dynamics that encompass the ``unique'' natural rate hypothesis, the structuralist hypothesis, and the hysteresis hypothesis.