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Equilibrium Unemployment in Australia: Concepts and Measurement

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  • P. K. TRIVEDI
  • G. M. BAKER

Abstract

This paper reviews some concepts of equilibrium unemployment and outlines the fundamental difficulties facing any attempt to produce estimates of the equilibrium rate of unemployment. It develops simple quasi‐reduced form models of aggregate unemployment based on rival non market‐clearing and market‐clearing theories. These equations form the basis of an empirical model of aggregate unemployment in Australia since 1969. The empirical evidence suggests that most of the observed increase in unemployment can be attributed to cyclical rather than structural‐frictional factors. However, stylized explanations of cyclical unemployment exclusively along the lines of Keynesian, Classical or equilibrium search theory are found inadequate.

Suggested Citation

  • P. K. Trivedi & G. M. Baker, 1985. "Equilibrium Unemployment in Australia: Concepts and Measurement," The Economic Record, The Economic Society of Australia, vol. 61(3), pages 629-643, September.
    • Handle: RePEc:bla:ecorec:v:61:y:1985:i:3:p:629-643
    DOI: 10.1111/j.1475-4932.1985.tb02018.x
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    References listed on IDEAS

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    Cited by:

    1. Bårdsen Gunnar & Hurn Stanley & McHugh Zöe, 2012. "Asymmetric Unemployment Rate Dynamics in Australia," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(1), pages 1-22, January.
    2. A.J. Hagger & N. Groenewold, 2000. "Time to Ditch the Natural rate?," Economics Discussion / Working Papers 00-09, The University of Western Australia, Department of Economics.
    3. R.M. Simes & C.J. Richardson, 1987. "Wage Determination In Australia," The Economic Record, The Economic Society of Australia, vol. 63(2), pages 144-155, June.
    4. P. K. Trtvedi & J. N. Alexander, 1988. "Incorporating International Competitiveness into the Demand for Labour Function: Some Issues of Specification and Interpretation," The Economic Record, The Economic Society of Australia, vol. 64(3), pages 196-208, September.
    5. Jeff Borland & Ian McDonald, 2000. "Labour Market Models of Unemployment in Australia," Melbourne Institute Working Paper Series wp2000n15, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. Anh T. Le & Paul W. Miller, 2000. "Australia's Unemployment Problem," The Economic Record, The Economic Society of Australia, vol. 76(232), pages 74-104, March.
    7. R.W. Peters & A. Petridis, 1988. "Potential Output and Okun's Law for Australia Since 1979 - Implications for Unemployment," Economics Discussion / Working Papers 88-10, The University of Western Australia, Department of Economics.
    8. N. Groenewold & A.J. Hagger, 1998. "The Australian Natural Rate of Unemployment: Some estimates from a structural VAR," Economics Discussion / Working Papers 98-23, The University of Western Australia, Department of Economics.
    9. Lenehan, A. J., 1996. "The macroeconomic effects of the postwar baby boom: Evidence from Australia," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 155-169.
    10. Jerome Fahrer & Andrew Pease, 1993. "The Unemployment/Vacancy Relationship in Australia," RBA Research Discussion Papers rdp9305, Reserve Bank of Australia.

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