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Production Constraints and the NAIRU

Author

Listed:
  • Hall, Stephen G.
  • Driver, Ciaran F.

Abstract

This paper argues that the production constraints in the basic NAIRU model should be distinguished by type: capital constraints and labour constraints. It notes the failure to incorporate this phenomenon in standard macro models. Using panel data for UK manufacturing over 80 quarters we show that capital constraints became relatively more important during the 1980s as industry failed to match the increase in labour flexibility with rising capital investment.

Suggested Citation

  • Hall, Stephen G. & Driver, Ciaran F., 2008. "Production Constraints and the NAIRU," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-15.
    • Handle: RePEc:zbw:ifweej:7260
    DOI: 10.5018/economics-ejournal.ja.2008-11
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Capital; labour; constraints; NAIRU; panel data; structural breaks;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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