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NAWRU and potential output in France

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  • Mustapha Baghli

Abstract

This article presents theory-consistent estimates of nonaccelerating wage rate of unemployment (NAWRU) and potential output in France. These estimates are obtained from an unobserved-components system approach combining a wage-Phillips curve and an Okun law's relationship. By applying the Apel and Jansson (1999) specification, the potential output and the NAWRU are both treated as unobserved stochastic processes and estimated simultaneously. In order to control the effect on wage setting of reductions in employers' social security contributions (SSC), we construct and add in the wage-Phillips curve an index of SSC exemptions. According to the results, from the mid-1990s, and especially over the years 2000-2004, the estimated NAWRU is consistent with this period of labour cost moderation and reductions in employer social security contributions.

Suggested Citation

  • Mustapha Baghli, 2007. "NAWRU and potential output in France," Applied Economics Letters, Taylor & Francis Journals, vol. 14(2), pages 95-98.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:2:p:95-98
    DOI: 10.1080/13504850500425709
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    1. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
    2. Jørgen Elmeskov, 1993. "High and Persistent Unemployment: Assessment of the Problem and Its Causes," OECD Economics Department Working Papers 132, OECD Publishing.
    3. Haldrup, Niels, 1994. "Semiparametric Tests for Double Unit Roots," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(1), pages 109-122, January.
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    Cited by:

    1. L. Lambertini & L. Marattin, 2014. "Adjustment to Equilibrium after a Demand Shock: A Strategic Interaction View," Working Papers wp952, Dipartimento Scienze Economiche, Universita' di Bologna.

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