Unemployment Invariance

Karanassou Marika and Snower Dennis J.
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Karanassou Marika: University of London,London, United Kingdom of Great Britain and Northern Ireland
Snower Dennis J.: University of London,London, Germany

German Economic Review, 2004, vol. 5, issue 3, 297-317

Abstract: This paper provides a critique of the ‘unemployment invariance hypothesis’, according to which the behavior of the labor market, by itself, ensures that the long-run unemployment rate is independent of the size of the capital stock, productivity and the labor force. In the context of an endogenous growth model, we show that the labor market alone need not contain all the equilibrating mechanisms to ensure unemployment invariance; in particular, other markets may perform part of the equilibrating process as well. By implication, policies that raise the growth path of capital or increase the effective working-age population may influence the long-run unemployment rate.

Keywords: Unemployment; employment; wage determination; labor supply; capital accumulation; productivity; technological change; economic growth (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (41)

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DOI: 10.1111/j.1465-6485.2004.00110.x

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