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Macroeconomics Beyond the NAIRU

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  • Storm, Servaas

    (Delft University of Technology)

  • Naastepad, C. W. M.

    (Delft University of Technology)

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    Abstract

    Economists and the governments they advise have based their macroeconomic policies on the idea of a natural rate of unemployment. Government policy that pushes the rate below this point—about 6 percent—is apt to trigger an accelerating rate of inflation that is hard to reverse, or so the argument goes. In this book, Servaas Storm and C.W.M. Naastepad make a strong case that this concept is flawed: that a stable Non-Accelerating Inflation Rate of Unemployment (NAIRU), independent of macroeconomic policy, does not exist. Consequently, government decisions based on the NAIRU are not only misguided but have huge and avoidable social costs, namely, high unemployment and sustained inequality. Skillfully merging theoretical and empirical analysis, Storm and Naastepad show how the NAIRU’s neglect of labor’s impact on technological change and productivity growth eclipses the many positive contributions that labor and its regulation make to economic performance. When these positive effects are taken into account, the authors contend, a more humane policy becomes feasible, one that would enhance productivity and technological progress while maintaining profits, thus creating conditions for low unemployment and wider equality.

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    Bibliographic Info

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    This book is provided by Harvard University Press in its series Economics Books with number 9780674062276 and published in 2012.

    ISBN: 9780674062276
    Handle: RePEc:hup:pbooks:9780674062276

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    Web page: http://www.hup.harvard.edu/

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    Cited by:
    1. David Kiefer & Codrina Rada, 2013. "Profit maximizing goes global: the race to the bottom," Working Paper Series, Department of Economics, University of Utah, University of Utah, Department of Economics 2013_05, University of Utah, Department of Economics.

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