Capital investment and unemployment in Europe: Neutrality or not?

Ciaran Driver and Jair Muñoz-Bugarin

Journal of Macroeconomics, 2010, vol. 32, issue 1, 492-496

Abstract: Productivity variables are often said to have no effect on the NAIRU under wage bargaining as the labour share is unaffected when production is characterised by a unit elasticity of substitution. While production functions such as the CES can explain a negative relationship between investment and equilibrium unemployment, the implication then is that the labour share should increase with investment. In this paper we show that for a long sample in the UK, the labour share has decreased with capital investment. For a panel of European countries for which estimation is possible, the same result is obtained.

Keywords: Capital; investment; Productivity; NAIRU; Unemployment; Inflation; Panel; Data (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:32:y:2010:i:1:p:492-496

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