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Can Productivity Growth Explain the NAIRU? Long-Run Evidence from Britain, 1871-1999

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  • TIMOTHY J. HATTON

Abstract

This paper investigates the effect of productivity growth on the non-accelerating inflation rate of unemployment (NAIRU) over the long run, using historically consistent time series for the UK from 1871 to 1999. A two-equation model of unemployment and wage-setting that incorporates productivity effects is estimated over the whole period, allowing for shifts associated with changes in labour market institutions. The results indicate that faster productivity growth reduces the NAIRU, but that this goes only part of the way towards explaining wide swings in average unemployment across the decades. Copyright (c) The London School of Economics and Political Science 2006.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0335.2006.00548.x
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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 74 (2007)
Issue (Month): 295 (08)
Pages: 475-491

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Handle: RePEc:bla:econom:v:74:y:2007:i:295:p:475-491

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Cited by:
  1. Marika Karanassou & Hector Sala, 2008. "Productivity Growth and the Phillips Curve: A Reassessment of the US Experience," Working Papers 623, Queen Mary, University of London, School of Economics and Finance.
  2. Sambit Bhattacharyya & Jeffrey G. Williamson, 2011. "Commodity Price Shocks And The Australian Economy Since Federation," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 51(2), pages 150-177, 07.
  3. Gene Ambrocio & Tae-Seok Jang, 2009. "Productivity Shocks and the New Keynesian Phillips Curve: Evidence from US and Euro Area," Kiel Advanced Studies Working Papers 453, Kiel Institute for the World Economy.
  4. Karanassou, Marika & Sala, Hector, 2011. "Inequality and Employment Sensitivities to the Falling Labour Share," IZA Discussion Papers 5796, Institute for the Study of Labor (IZA).
  5. Dario JUDZIK & Hector SALA, 2013. "Productivity, deunionization and trade: Wage effects and labour share implications," International Labour Review, International Labour Organization, vol. 152(2), pages 205-236, 06.
  6. Gylfi Zoega, 2009. "Employment and Asset Prices," Birkbeck Working Papers in Economics and Finance 0917, Birkbeck, Department of Economics, Mathematics & Statistics.
  7. Junichi Fujimoto, 2008. "Implications of General and Specific Productivity Growth in a Matching Model," 2008 Meeting Papers 584, Society for Economic Dynamics.
  8. Timothy J. Hatton & Mark Thomas, 2012. "Labour Markets in Recession and Recovery: The UK and the USA in the 1920s and 1930s," CEH Discussion Papers 001, Centre for Economic History, Research School of Economics, Australian National University.
  9. Hatton, Timothy J. & Thomas, Mark, 2010. "Labour Markets in the Interwar Period and Economic Recovery in the UK and the USA," CEPR Discussion Papers 7983, C.E.P.R. Discussion Papers.

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