Unemployment invariance hypothesis and labor supply: A test for 31 American countries

Ángel Maridueña-Larrea; Ángel Martín-Román; Ángel Maridueña-Larrea; Ángel Martín-Román

doi:10.3934/NAR.2026013

National Accounting Review

2026, Volume 8, Issue 2: 299-325. doi: 10.3934/NAR.2026013

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Research article

Unemployment invariance hypothesis and labor supply: A test for 31 American countries

Ángel Maridueña-Larrea ^1,2,
Ángel Martín-Román ^{3
,
,}

1.
Centro de Estudios Económicos para el Desarrollo del Ecuador, Facultad de Ciencias Sociales, Educación Comercial y Derecho, Universidad Estatal de Milagro, Milagro, Provincia del Guayas, Ecuador
2.
Observatorio de la Política Económica y Competitividad del Ecuador, Facultad de Economía Agrícola, Universidad Agraria del Ecuador, Milagro, Provincia del Guayas, Ecuador
3.
Dpto. Análisis Económico, Facultad de Ciencias Sociales jurídicas y de la Comunicación. Universidad de Valladolid, Spain

Received: 27 October 2025 Revised: 18 February 2026 Accepted: 02 April 2026 Published: 12 June 2026
JEL Codes: E24, C10, J64, J68

This study examined the empirical validity of the unemployment invariance hypothesis (UIH) using a sample of 31 American countries and annual data from 1991 to 2023. While previous literature often focused on single-country analyses, an existing study for Latin America covered only six countries and relied on short time spans, limiting its ability to capture full economic cycles. This paper expanded both the temporal and geographical scope, enabling more accurate cross-country comparisons. The results generally reject the UIH, with significant implications for economic policy in both cases—whether the hypothesis is accepted or not. In countries where UIH is rejected, the discouraged worker effect (DWE) tends to outweigh the added worker effect (AWE). These findings highlight the need for country-specific labor policies, which can be better designed based on the estimates presented.
- cointegration,
- added worker effect,
- discouraged worker effect,
- unemployment invariance,
- unemployment rate,
- labor force participation rate
Citation: Ángel Maridueña-Larrea, Ángel Martín-Román. 2026: Unemployment invariance hypothesis and labor supply: A test for 31 American countries, National Accounting Review, 8(2): 299-325. doi: 10.3934/NAR.2026013

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Abstract

This study examined the empirical validity of the unemployment invariance hypothesis (UIH) using a sample of 31 American countries and annual data from 1991 to 2023. While previous literature often focused on single-country analyses, an existing study for Latin America covered only six countries and relied on short time spans, limiting its ability to capture full economic cycles. This paper expanded both the temporal and geographical scope, enabling more accurate cross-country comparisons. The results generally reject the UIH, with significant implications for economic policy in both cases—whether the hypothesis is accepted or not. In countries where UIH is rejected, the discouraged worker effect (DWE) tends to outweigh the added worker effect (AWE). These findings highlight the need for country-specific labor policies, which can be better designed based on the estimates presented.

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