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

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.