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Capital Accumulation, Labour Market Institutions, and Unemployment in the Medium Run

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  • Engelbert Stockhammer
  • Erik Klär

Abstract

According to the mainstream view, labour market institutions (LMI) are the key determinants of unemployment in the medium run. The actual empirical explanatory power of measures for labour market institutions, however, has been called into question recently (Baker et al 2005, Baccaro and Rei 2007). The Keynesian view holds periods of high real interest rates and insufficient capital accumulation responsible for unemployment (Arestis et al 2007). Empirical work in this tradition has paid little attention to role of LMI. This paper contributes to the debate by highlighting the role of autonomous changes in capital accumulation as a macroeconomic shock. In the empirical analysis, medium-term unemployment is explained by capital accumulation, labour market institutions and a number of macroeconomic shocks in a panel analysis covering 20 OECD countries. The economic effects of institutional changes, variations in capital accumulation and other macro shocks are compared. Capital accumulation and the real interest rate are found to have statistically significant effects that are robust to the inclusion of control variables and show larger effects than LMI.

Suggested Citation

  • Engelbert Stockhammer & Erik Klär, 2008. "Capital Accumulation, Labour Market Institutions, and Unemployment in the Medium Run," Discussion Papers of DIW Berlin 834, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp834
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    7. Nicos Christodoulakis & Christos Axioglou, 2017. "Underinvestment and Unemployment: The Double Hazard in the Euro Area," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 63(1), pages 49-80.
    8. Di Caro, Paolo, 2014. "Regional recessions and recoveries in theory and practice: a resilience-based overview," MPRA Paper 60300, University Library of Munich, Germany.
    9. Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 317-354.
    10. Cockshott, Paul & Zachariah, David, 2014. "Conservation laws, financial entropy and the Eurozone crisis," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-55.
    11. Wenzlaff, Ferdinand & Kimmich, Christian & Richters, Oliver, 2014. "Theoretische Zugänge eines Wachstumszwangs in der Geldwirtschaft," ZÖSS-Discussion Papers 45, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    12. Mihai Mutascu & Scott W. Hegerty, 2023. "Predicting the contribution of artificial intelligence to unemployment rates: an artificial neural network approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(2), pages 400-416, June.
    13. Robert Calvert Jump & Engelbert Stockhammer, 2019. "Reconsidering the natural rate hypothesis," FMM Working Paper 45-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    14. Hegeland, Erik & Taalbi, Josef, 2019. "What determines unemployment in the long run? Band spectrum regression on ten countries," Lund Papers in Economic History 203, Lund University, Department of Economic History.
    15. Hegelund, Erik & Taalbi, Josef, 2023. "What determines unemployment in the long run? Band spectrum regression on ten countries 1913–2016," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 144-167.
    16. Botta, Alberto & Tippet, Ben, 2020. "The roots of a divided eurozone: rigid labour markets or asymmetric technology-macroeconomic regimes?," Greenwich Papers in Political Economy 30958, University of Greenwich, Greenwich Political Economy Research Centre.
    17. Heimberger, Philipp & Kapeller, Jakob & Schütz, Bernhard, 2017. "The NAIRU determinants: What’s structural about unemployment in Europe?," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 883-908.
    18. Chletsos, Michael & Sintos, Andreas, 2023. "The effects of IMF conditional programs on the unemployment rate," European Journal of Political Economy, Elsevier, vol. 76(C).
    19. Engelbert Stockhammer & Alexander Guschanski & Karsten Köhler, 2014. "Unemployment, capital accumulation and labour market institutions in the Great Recession," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 182-194, September.
    20. Sturn, Simon & Epstein, Gerald, 2021. "How much should we trust five-year averaging to purge business cycle effects? A reassessment of the finance-growth and capital accumulation-unemployment nexus," Economic Modelling, Elsevier, vol. 96(C), pages 242-256.
    21. Klara Zwickl & Franziska Disslbacher & Sigrid Stagl, 2016. "Work-sharing for a Sustainable Economy. WWWforEurope Working Paper No. 111," WIFO Studies, WIFO, number 58684, August.
    22. Marcel Garz & Artur Tarassow, 2011. "Does an expanding low-pay sector decrease structural unemployment? Evidence from Germany," Macroeconomics and Finance Series 201104, University of Hamburg, Department of Socioeconomics.
    23. van Treeck, Till. & Sturn, Simon., 2012. "Income inequality as a cause of the Great Recession? : A survey of current debates," ILO Working Papers 994709343402676, International Labour Organization.
    24. Daniel HERRERO & Luis CÁRDENAS & Julián LÓPEZ GALLEGO, 2020. "Does deregulation decrease unemployment? An empirical analysis of the Spanish labour market," International Labour Review, International Labour Organization, vol. 159(3), pages 367-396, September.

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    More about this item

    Keywords

    Unemployment; NAIRU; capital accumulation; labour market institutions; Keynesian economics;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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