Unemployment in Britain: Some more Questions
Simon Kirby (s.kirby@niesr.ac.uk)
No 293, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research
Abstract:
Recent time series evidence favouring a supply-side interpretation of long-run unemployment in the UK is based on the finding of cointegration between unemployment and wage pressure variables. We show that this is necessary but not sufficient. The key assumptions in recent work, that a single relation exists between unemployment and wage pressure variables and that the causality is from these variables to unemployment, both appear to be invalid. In the light of this, and evidence of its serious parameter instability, this model of long-run UK unemployment seems flawed.
Date: 2007-04
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