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Unemployment and Productivity in the Long Run: The Role of Macroeconomic Volatility

Author

Listed:
  • Pierpaolo Benigno

    (LUISS Guido Carli and EIEF)

  • Luca Antonio Ricci

    (International Monetary Fund)

  • Paolo Surico

    (London Business School and CEPR)

Abstract

This paper presents a new empirical regularity between the volatility of productivity growth and long-run unemployment for a given level of long-run productivity growth. A theoretical framework based on asymmetric real wage rigidities is shown to have the potential to rationalize this finding. The model tends to fit U.S. long-run unemployment better than a specification based on long-run productivity growth only, especially during the Great Moderation and the Great Recession.

Suggested Citation

  • Pierpaolo Benigno & Luca Antonio Ricci & Paolo Surico, 2015. "Unemployment and Productivity in the Long Run: The Role of Macroeconomic Volatility," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 698-709, July.
    • Handle: RePEc:tpr:restat:v:97:y:2015:i:2:p:698-709
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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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