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Production Constraints and the NAIRU

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  • Driver, Ciaran F.
  • Hall, Stephen G.

Abstract

This paper argues that the production constraints in the basic NAIRU model should be distinguished by type: capital constraints and labour constraints. It notes the failure to incorporate this phenomenon in standard macro models. Using panel data for UK manufacturing over eighty quarters it is shown that capital constraints became relatively more important during the 1980s as industry failed to match the increase in labour flexibility with rising capital investment. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2007-41.

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Date of creation: 2007
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Handle: RePEc:zbw:ifwedp:6168

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Keywords: capital labour constraints nairu panel; data structural; breaks;

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Cited by:
  1. Driver, Ciaran & Muñoz-Bugarin, Jair, 2010. "Capital investment and unemployment in Europe: Neutrality or not?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 492-496, March.

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