VICIOUS AND VIRTUOUS CIRCLES – THE POLITICAL ECONOMY OF UNEMPLOYMENT

A. Patrick Minford and Ruthira Naraidoo

South African Journal of Economics, 2010, vol. 78, issue 1, 1-22

Abstract: We develop an empirical non‐linear model of equilibrium unemployment and test its policy implications for a number of OECD countries. The model here sees the natural rate and the associated equilibrium path of unemployment as endogenous, pushed by the interaction of 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 of unemployment react to shocks by demanding more or less social protection. The reduced form results from a dozen OECD economies give support to the model prediction of a pattern of unemployment behaviour in which unemployment moves between high and low equilibria in response to shocks and the model specification is superior in forecasting performance out of sample to alternative models of “generalised hysteresis”.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/j.1813-6982.2010.01235.x

Related works:
Working Paper: Vicious and virtuous circles--The political economy of unemployment (2009)
Working Paper: Vicious and Virtuous Circles: The Political Economy of Unemployment (2006)
Working Paper: Vicious and Virtuous Circles - The Political Economy of Unemployment (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:sajeco:v:78:y:2010:i:1:p:1-22

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0038-2280

Access Statistics for this article

South African Journal of Economics is currently edited by Philip A. Black

More articles in South African Journal of Economics from Economic Society of South Africa Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().