It is high time to ditch the NAIRU

Servaas Storm and C. Naastepad

Journal of Post Keynesian Economics, 2007, vol. 29, issue 4, 531-554

Abstract: According to the mainstream theory of equilibrium unemployment, persistent unemployment is caused (mainly) by "excessive" labor market regulation, whereas aggregate demand, capital accumulation, and technological progress have no lasting effect on unemployment. We argue that the mainstream nonaccelerating inflation rate of unemployment (NAIRU) model is only a special case of a general model of equilibrium unemployment, in which aggregate demand, investment, and endogenous technological progress have long-term effects. It follows that the labor market policy prescriptions (i.e., to drastically deregulate), following from the standard NAIRU model, can by no means be generalized. Empirical support for the general model is provided by an econometric analysis for 20 Organization for Economic Cooperation and Development (OECD) countries (1984-97): demand factors are the overriding determinants of structural unemployment in the OECD.

Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://hdl.handle.net/10.2753/PKE0160-3477290401 (text/html)
Access to full text is restricted to subscribers.

Related works:
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:mes:postke:v:29:y:2007:i:4:p:531-554

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MPKE20

DOI: 10.2753/PKE0160-3477290401

Access Statistics for this article

More articles in Journal of Post Keynesian Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().