Vicious and virtuous circles -- The political economy of unemployment in interwar UK and USA

Kent Gerard Matthews (), A. Patrick L. Minford and Ruthira Naraidoo ()

European Journal of Political Economy, 2008, vol. 24, issue 3, pages 605-614

Abstract: This paper develops a political economy model of multiple unemployment equilibria to provide a theory of an endogenous natural rate of unemployment for the UK and the US interwar period. The theory here sees the natural rate and the associated path of unemployment as a reaction to mainly demand shocks and the institutional structure of the economy. The channel through which these two forces feed on each other is a political economy process whereby voters with limited information on the natural rate react to shocks by demanding more or less social protection. The reduced form results confirm a pattern of unemployment behaviour in which unemployment moves between high and low equilibria in response to shocks.

Date: 2008

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Related works:
Working Paper: Vicious and Virtuous Circles - The Political Economy of Unemployment in Interwar UK and USA (2006)
Working Paper: Vicious and Virtuous Circles - The Political Economy of Unemployment in Interwar UK and USA (2006)
Working Paper: Vicious and Virtuous Circles - The Political Economy of Unemployment in Interwar UK and USA (2008)
Working Paper: Vicious and Virtuous Circles - the Political Economy of Unemployment in Interwar UK and USA (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:poleco:v:24:y:2008:i:3:p:605-614

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