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Capital investment and unemployment in Europe: Neutrality or not?

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  • Driver, Ciaran
  • Muñoz-Bugarin, Jair

Abstract

Productivity variables are often said to have no effect on the NAIRU under wage bargaining as the labour share is unaffected when production is characterised by a unit elasticity of substitution. While production functions such as the CES can explain a negative relationship between investment and equilibrium unemployment, the implication then is that the labour share should increase with investment. In this paper we show that for a long sample in the UK, the labour share has decreased with capital investment. For a panel of European countries for which estimation is possible, the same result is obtained.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:492-496
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    References listed on IDEAS

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    Cited by:

    1. Raurich, Xavier & Sala, Hector & Sorolla, Valeri, 2012. "Factor shares, the price markup, and the elasticity of substitution between capital and labor," Journal of Macroeconomics, Elsevier, pages 181-198.
    2. Raurich, Xavier & Sala, Hector & Sorolla, Valeri, 2012. "Factor shares, the price markup, and the elasticity of substitution between capital and labor," Journal of Macroeconomics, Elsevier, pages 181-198.
    3. Chella, Namapsa & Phiri, Andrew, 2017. "Long-run cointegration between foreign direct investment, direct investment and unemployment in South Africa," MPRA Paper 82371, University Library of Munich, Germany.
    4. Ioanna C. Bardakas, 2016. "Structural and cyclical factors of Greece’s current account balances: a note," Working Papers 206, Bank of Greece.
    5. Nicos Christodoulakis & Christos Axioglou, 2016. "Underinvestment and unemployment: the double hazard in the euro area," Working Papers 205, Bank of Greece.
    6. repec:spr:eurasi:v:4:y:2014:i:1:p:3-30 is not listed on IDEAS
    7. José Ramón García & Valeri Sorolla, 2014. "Monopolistic Competition and Different Wage Setting Systems," Scottish Journal of Political Economy, Scottish Economic Society, pages 48-77.
    8. repec:spr:pharme:v:4:y:2014:i:1:p:3-30 is not listed on IDEAS

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