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

Kent Matthews, A. Patrick Minford and Ruthira Naraidoo

European Journal of Political Economy, 2008, vol. 24, issue 3, 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 (2008)
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 (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:24:y:2008:i:3:p:605-614

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