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Structural Estimates of Equilibrium Unemployment in Six OECD Economies

In Europe, neither unemployment rates nor institutions are uniform. In the EMU, countries have coordinated their monetary policy, and fiscal policy might follow. Does convergence in fiscal policy imply that unemployment rates will converge, too, or is diversified fiscal policy desirable? An answer to this question requires insight into the dependence on fiscal policy of the unemployment rate in equilibrium. This study estimates the equilibrium rate of unemployment and shows that it has been affected significantly by taxes and benefits. Uniform fiscal policy would not, however, harmonise the unemployment rates because the impact of policy varies widely across the OECD economies.

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Paper provided by European Network of Economic Policy Research Institutes in its series Economics Working Papers with number 022.

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Length: 36 pages
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:epr:enepwp:022
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  25. Graafland, J.J. & Huizinga, F.H., 1998. "Taxes and benefits in a non-linear wage equation," MPRA Paper 21076, University Library of Munich, Germany.
  26. Hansen, Gerd, 2000. "The German labour market and the unification shock," Economic Modelling, Elsevier, vol. 17(3), pages 439-454, August.
  27. Pete Richardson & Laurence Boone & Claude Giorno & Mara Meacci & David Rae & David Turner, 2000. "The Concept, Policy Use and Measurement of Structural Unemployment: Estimating a Time Varying NAIRU Across 21 OECD Countries," OECD Economics Department Working Papers 250, OECD Publishing.
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