The complementarity and substitutability relationships between information technology and benefits and duration of unemployment

This paper aims to analyze the complementarity and substitutability relationships between information technology (IT) and unemployment benefits (B) and duration of unemployment (D), two important policy and macroeconomic variables, by using the partial adjustment (PA) valuation (PAV) approaches where the speeds of PA are fixed and time-varying. The proposed eight research models derived from the PAV approaches based on the theory of PA are fitted into a country-level panel data set covering the period from 1993 to 2008 for a sample of 12 countries and are estimated by the seemingly unrelated regressions (SUR) and nonlinear SUR (NLSUR) methods. The findings include: (i) the speeds of PA are dynamic and variable rather than constant, causing the fluctuations of the performance index over time; (ii) among the three production factors used, the traditional (non-IT) capital (K_jt) is found to exert the greatest impact upon the desired (true) output and, consequently, upon the performance index; (iii) B or D or joint B and D has the power to shift the speeds of PA in the countries considered; (iv) the impacts of B, D, and the combination of B and D upon the actual (observed) output and, hence, upon the business value of IT vary from country to country; and (v) all in all, the empirical evidence strongly suggests that the government policy of B, D, or B and D combined is good for some advanced developed countries (e.g., US and CN) but may be ineffective for some newly developed nations (e.g., Greece and Norway) in the presence of IT, and that the policy of joint B and D is good for all four advanced developed countries and five (Australia, Denmark, Norway, Portugal, and Switzerland) of the eight newly developed economies in the absence of IT.