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Multiple Equilibria in the British Labour Market: Some Empirical Evidence

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  • Manning, Alan

Abstract

This paper constructs a simple, imperfectly competitive macro model which may have single or multiple equilibria depending on whether there are constant or increasing returns to scale in production. The model can be estimated and so can be used not only to test multiple versus single equilibrium models, but also to test whether multiple equilibrium models are capable of explaining the observed behaviour of unemployment. The model is estimated for the British economy for the period 1951-87. Some evidence for multiple equilibria is found and using such a model suggests that the rise in unemployment in Britain in the 1980s is best understood as a move from a low- to a high-equilibrium unemployment rate. Although the multiple equilibrium model does perform better than a single equilibrium model, however, the difference is not very significant so that there must remain considerable uncertainty about this issue.

Suggested Citation

  • Manning, Alan, 1991. "Multiple Equilibria in the British Labour Market: Some Empirical Evidence," CEPR Discussion Papers 540, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:540
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    Cited by:

    1. Raurich, Xavier & Sala, Hector & Sorolla, Valeri, 2006. "Unemployment, Growth, And Fiscal Policy: New Insights On The Hysteresis Hypothesis," Macroeconomic Dynamics, Cambridge University Press, pages 285-316.
    2. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-141, March.
    3. Joerg Heining & Joerg Lingens, "undated". "Social Interaction in Regional Labour Markets," Regional and Urban Modeling 283600034, EcoMod.
    4. Bjornstad, Roger, 2006. "Learned helplessness, discouraged workers, and multiple unemployment equilibria," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(3), pages 458-475, June.
    5. Julie Beugnot, 2008. "The effects of a minimum wage increase in a model with multiple unemployment equilibria," Working Papers 08-16, LAMETA, Universtiy of Montpellier, revised Oct 2008.
    6. Campbell leith & Chol-Won Li, 2001. "Unemployment and the Productivity Slowdown: A Labour Supply Perspective," Working Papers 2001_13, Business School - Economics, University of Glasgow.
    7. Jean Mercenier & Bernardin Akitoby, 1993. "On intertemporal general-equilibrium reallocation effects of Europe's move to a single market," Discussion Paper / Institute for Empirical Macroeconomics 87, Federal Reserve Bank of Minneapolis.
    8. Sujit Kapadia, 2003. "The Capital Stock and Equilibrium Unemployment: A New Theoretical Perspective," Economics Series Working Papers 181, University of Oxford, Department of Economics.
    9. Roger Bjørnstad, 2001. "Learned Helplessness, Discouraged Workers, and Multiple Unemployment Equilibria in a Search Model," Discussion Papers 303, Statistics Norway, Research Department.
    10. Jeanne, Olivier & Masson, Paul, 1997. "Was the French Franc Crisis a Sunspot Equilibrium?," Center for International and Development Economics Research (CIDER) Working Papers 233613, University of California-Berkeley, Department of Economics.
    11. Sujit Kapadia, 2005. "Optimal Monetary Policy under Hysteresis," Economics Series Working Papers 250, University of Oxford, Department of Economics.
    12. Kolm, Ann-Sofie, 2005. "Work norms and unemployment," Economics Letters, Elsevier, vol. 88(3), pages 426-431, September.
    13. Kåre Johansen, "undated". "Hysteresis in Unemployment: Evidence from Norwegian Counties," Working Paper Series 0602, Department of Economics, Norwegian University of Science and Technology, revised 20 Aug 2002.
    14. Joerg Lingens & Joerg Heining, 2006. "Social Interaction in Regional Labour Markets," ERSA conference papers ersa06p43, European Regional Science Association.
    15. Ioannis Kaskarelis, 1997. "Aggregate returns to scale in Greek manufacturing," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1673-1678.

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