Testing hysteresis for the US and UK involuntary part-time employment

Abstract

In this paper we test the persistence of involuntary part-time employment, making use of large historical series for the US and UK. To evaluate the robustness of our results a comprehensive macro-econometric approach, a battery of panel and time series unit root/stationarity tests were performed, also allowing for flexible specifications as fractional integration and structural breaks in the series. Our results confirm that underemployment in both countries has not returned to its pre-recession levels providing robust evidence about the existence of a long memory process in the involuntary part-time employment and a structural break in the mean of the series in the Great Recession surroundings. Importantly, the two phenomena, identified by a sudden deterministic break in the levels of the models employed and by a unit root process of order one or higher, coexist an interact together.