What's 'structural' about unemployment in Europe: On the Determinants of the European Commission's NAIRU Estimates

Jakob Kapeller, Philipp Heimberger and Bernhard Schuetz ()
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Bernhard Schuetz: Department of Economics, Johannes Kepler University Linz
Authors registered in the RePEc Author Service: Bernhard Schütz

No 47, ICAE Working Papers from Johannes Kepler University, Institute for Comprehensive Analysis of the Economy

Abstract: This paper analyzes the determinants of the European Commission's NAIRU estimates for 14 European OECD countries during 1985-2012. The NAIRU is a poor proxy for 'structural unemployment': Labor market institutions - employment protection legislation, union density, tax wedge, minimum wages - underperform in explaining the NAIRU, while cyclical variables - capital accumulation and boom - bust patterns in housing markets - play an important role. This is relevant since the NAIRU is used to compute potential output and structural budget balances and, hence, has a direct impact on the scope and evaluation of fiscal policy in EU countries.

Keywords: NAIRU; potential output; fiscal policy coordination; unemployment in Europe; labor market flexibility (search for similar items in EconPapers)
JEL-codes: C54 E24 E62 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016-03
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (3)

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