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Capital investment and unemployment in Europe: Neutrality or not?

  • Driver, Ciaran
  • Muñoz-Bugarin, Jair

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.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 1 (March)
Pages: 492-496

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:492-496
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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