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Unemployment Equilibria and Input Prices: Theory and Evidence from the United States

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  • Carruth, Alan A.
  • Hooker, Mark A.
  • Oswald, Andrew J.

Abstract

This paper develops an efficiency-wage model where input prices affect the equilibrium rate of unemployment. We show that a simple framework based on only two prices (the real price of oil and the real rate of interest) is able to explain the main post-war movements in the rate of U.S. joblessness. The equations do well in forecasting unemployment many years out-of-sample, and provide evidence that the oil-price spike associated with Iraq’s invasion of Kuwait appears to be a component of the “mystery” recession which followed.

Suggested Citation

  • Carruth, Alan A. & Hooker, Mark A. & Oswald, Andrew J., 1998. "Unemployment Equilibria and Input Prices: Theory and Evidence from the United States," Economic Research Papers 268778, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:268778
    DOI: 10.22004/ag.econ.268778
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    More about this item

    Keywords

    Labor and Human Capital; Research Methods/ Statistical Methods;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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