The NAIRU determinants: What’s structural about unemployment in Europe?
Philipp Heimberger (),
Jakob Kapeller () and
Journal of Policy Modeling, 2017, vol. 39, issue 5, 883-908
This paper analyzes the determinants of the European Commission’s estimates of the non-accelerating inflation rate of unemployment (NAIRU) for 14 European 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 finding is policy-relevant since the NAIRU is used to compute potential output and structural budget balances and, hence, has a direct impact on scope and evaluation of fiscal policies in Europe.
Keywords: Unemployment; Fiscal policy; Labor market institutions; Potential output; NAIRU (search for similar items in EconPapers)
JEL-codes: C54 E24 E62 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:39:y:2017:i:5:p:883-908
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