European Parliament Library

Unemployment and Productivity in the Long Run :, the Role of Macroeconomic Volatility, Paolo Surico, Luca Ricci, Pierpaolo Benigno

We propose a theory of low-frequency movements in unemployment based on asymmetric real wage rigidities. The theory generates two main predictions: long-run unemployment increases with (i) a fall in long-run productivity growth and (ii) a rise in the variance of productivity growth. Evidence based on U.S. time series and on an international panel strongly supports these predictions. The empirical specifications featuring the variance of productivity growth can account for two U.S. episodes which a linear model based only on long-run productivity growth cannot fully explain. These are the decline in long-run unemployment over the 1980s and its rise during the late 2000s
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; 1. Introduction; Figure 1; 2. The Model; 2.1. Flexible wages; 2.2 Definition of unemployment rate; 2.3 Sticky real wages; 2.3.1 The productivity growth-unemployment trade-off; Figure 2; Figure 3; 2.4 Downward real wage rigidity; 2.4.1 The productivity growth-unemployment trade-off; Figure 4; 3. Evidence for the United States; 3.1 Measuring unemployment and productivity trends; 3.2 The fit of the linear model; Figure 5; 3.3 Controlling for demographics; Table 1. Controlling for demographics; 3.4 The fit of the nonlinear model; Figure 6
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (70 p.)
Specific Material Designation
Form Of Item

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