The NAIRU reconsidered: why labour market deregulation may raise unemployment
According to the mainstream theory of equilibrium unemployment, persistent unemployment is caused mainly by 'excessive' labour market regulation, whereas aggregate demand, capital accumulation and technological progress have no lasting effect on unemployment. We show that the mainstream non-accelerating inflation rate of unemployment (NAIRU) model is a special case of a general model of equilibrium unemployment, in which aggregate demand, investment and endogenous technological progress do have long-term effects. It follows that labour market deregulation does not necessarily reduce steady-inflation unemployment. Theoretically, if the decline in real wage growth claims owing to deregulation is smaller than the ensuing decline in labour productivity growth and in the warranted real wage growth, then in that case steady-inflation unemployment may increase. Empirical evidence for 20 Organisation for Economic Cooperation and Development (OECD) countries (1984-1997) indicates that the impact of labour market deregulation on OECD unemployment is zero, and possibly negative (causing a higher rate of unemployment).
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 22 (2008)
Issue (Month): 5 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CIRA20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CIRA20|
When requesting a correction, please mention this item's handle: RePEc:taf:irapec:v:22:y:2008:i:5:p:527-544. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.