Testing for Unemployment Hysteresis by Gender and Education Status in Türkiye

This study aims to examine the dynamics of unemployment rates by gender and education status in Türkiye as a developing country over the January 2005– November 2020 period. There are mainly two theories about dynamic patterns in unemployment rates in the literature: natural rate and hysteresis hypothesis. The first theory states that unemployment will eventually reach a natural rate, which would indicate that it is stationary. Therefore, policymakers should refrain from meddling with their stabilizing strategies. According to the hysteresis hypothesis, the rigidity of the labor market causes shocks to have a permanent effect on unemployment rates. Therefore, the hysteresis indicates a non-stationary pattern of unemployment. Given the situation, policymakers should intervene in their stabilization strategies. To determine the stationarity properties of series, we use unit root tests developed for bounded time series, since unemployment rates are bounded, and conventional unit root tests become oversize when bounds are ignored. The results show that unemployment rates for primary school, vocational high school and male are stationary, which implies that natural rate hypothesis is valid, while hysteresis hypothesis is valid for other unemployment rates.