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Do Labour Market Reforms Pay Off? Unemployment and Capital Accumulation in Portugal

Bruno Damásio and Diogo Martins ()

No 2017/01, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: The aim of this paper is to study the long-run relationship between unemployment, capital accumulation and labour market variables in Portugal for the 1985Q1-2013Q4 period. We use an ARDL-bounds test model to perform the econometric estimation. We nd evidence that capital accumulation has been the main driver of long-run unemployment (NAIRU), whilst labour market variables have played either a negligible or an existent explicative role. It suggests that Portuguese NAIRU is endogenous relative to capital accumulation. Consequently, we conclude that the labour market reforms proposed by Troika were inadequate to the Portuguese case as they were based upon a theoretical framework (exogenous NAIRU model) that was not representative of the Portuguese labour market.

Keywords: NAIRU; Unemployment; Capital Accumulation; Labour Market Institutions; ARDL; Bounds Test; Post Keynesian Economics (search for similar items in EconPapers)
JEL-codes: E11 E12 E22 E24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017-01
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More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
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