Explaining European Unemployment: Testing the NAIRU Hypothesis and a Keynesian Approach
The aim of the paper is to compare the NAIRU hypothesis regarding European unemployment and a Keynesian approach to the issue and to evaluate them econometrically. For the NAIRU explanation, wage push variables are key in explaining the rise of European unemployment, for a Keynesian approach it is capital accumulation that is key. The theories are tested using time series data for Germany, France, Italy, the UK and the USA, using the seemingly unrelated regression method (SUR). Unemployment benefits, union density and the tax wedge are used as wage push variables, and the growth of business capital stock as the accumulation variable. The NAIRU specification performs poorly, with only the tax wedge having a positive effect on unemployment as predicted and only unemployment benefits having a negative effect on employment growth. However the results are not robust to changes in the specification. The Keynesian approach is more successful, with capital accumulation being statistically significant in all countries and robust to changes in the specification. Moreover, it can be pooled across countries.
Volume (Year): 18 (2004)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CIRA20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CIRA20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivier J. Blanchard & Lawrence H. Summers, 1986.
"Hysteresis and the European Unemployment Problem,"
NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90
National Bureau of Economic Research, Inc.
- Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
- Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Working Papers 1950, National Bureau of Economic Research, Inc.
- E. Yndgaard & Palle S. Andersen & Marc Klau, 1999. "Higher profits and lower capital prices: is factor allocation optimal?," BIS Working Papers 65, Bank for International Settlements.
- Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
- Arestis, Philip & Mariscal, Iris Biefang-Frisancho, 1998. "Capital shortages and asymmetries in UK unemployment," Structural Change and Economic Dynamics, Elsevier, vol. 9(2), pages 189-204, June.
- Philip Arestis & Iris Biefang-Frisancho Mariscal, "undated". "Capital Shortages and Asymmetries in UK Unemployment," Working Papers 9607, University of East London, Department of Economics.
- Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
- Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
- Laurence M. Ball, 1997. "Disinflation and the NAIRU," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 167-194 National Bureau of Economic Research, Inc.
- Laurence Ball, 1996. "Disinflation and the NAIRU," NBER Working Papers 5520, National Bureau of Economic Research, Inc.
- Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
- Bruno, Michael & Easterly, William, 1995. "Inflation crises and long-run growth," Policy Research Working Paper Series 1517, The World Bank.
- Michael Bruno & William Easterly, 1995. "Inflation Crises and Long-Run Growth," NBER Working Papers 5209, National Bureau of Economic Research, Inc.
- Lovell, Michael C, 1983. "Data Mining," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 1-12, February.
- Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, July.
- Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-816, May.
- Solow, Robert M., 2000. "Growth Theory: An Exposition," OUP Catalogue, Oxford University Press, edition 2, number 9780195109030.
- Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January. Full references (including those not matched with items on IDEAS)