Unemployment Equilibria and Input Prices: Theory and Evidence from the United States
The paper develops an efficiency-wage model where input prices affect the equlibrium 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. joblessnss. The equations do well in forecasting unemployment many out-of-sample, and provide evidence that the oil price spike associated with Iraq's invasion of Kuweit appears to be a component of the "mystery" recession which followed.
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|Date of creation:||1997|
|Contact details of provider:|| Postal: United Kingdom; Centre for Economic Performance & Institute of Economics and Statistics, Oxford University. Manor Road. Oxford OX1 3Ul|
Web page: http://www.economics.ox.ac.uk/
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- Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
- Edmund S. Phelps, 1992. "Consumer Demand and Equilibrium Unemployment in a Working Model of the Customer-Market Incentive-Wage Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 1003-1032.
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- Burbidge, John & Harrison, Alan, 1984.
"Testing for the Effects of Oil-Price Rises Using Vector Autoregressions,"
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Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 459-484, June.
- John Burbidge & Alan Harrison, 1982. "Testing for the Effects of Oil-Price Rises Using Vector Autoregressions," School of Economics Working Papers 1982-01, University of Adelaide, School of Economics.
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91-6, Federal Reserve Bank of Chicago.
- Oswald Andrew J., 1996. "A Conjecture on the Explanation for High Unemployment in the Industrialized Nations : Part I," The Warwick Economics Research Paper Series (TWERPS) 475, University of Warwick, Department of Economics.
- Rasche, Robert H. & Tatom, John A., 1981. "Energy price shocks, aggregate supply and monetary policy: The theory and the international evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 14(1), pages 9-93, January.
- Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
- Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June.
- Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
- Michael Bruno & Jeffrey Sachs, 1982. "Input Price Shocks and the Slowdown in Economic Growth: The Case of U.K. Manufacturing," Review of Economic Studies, Oxford University Press, vol. 49(5), pages 679-705.
- Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
- Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, vol. 100(401), pages 391-439, June.
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