The NAIRU-Concept: A Few Remarks

Karl Pichelmann and Andreas Ulrich Schuh

No 178, OECD Economics Department Working Papers from OECD Publishing

Abstract: This note gives a brief survey of main theoretical and empirical issues with respect to the NAIRU concept. According to modern labour market literature NAIRU is defined as the rate of unemployment at which inflation stabilises in the absence of any wage-price surprises. Conventional thinking about the equilibrium unemployment rate assumes that in the long run NAIRU is determined solely y supply side factors of the labour market. We show that quite complex adjustment dynamics may arise even in simple log-linear wage-price models. Furthermore we provide a survey on a number of “hysteresis-mechanisms” which could lead to permanent shifts of equilibrium unemployment over time, implying that an unique long run NAIRU may not even exist.In addition to theoretical issues we refer to two serious problems which might arise with empirical applications of the NAIRU concept. First various empirical studies suggest that results highly depend on model specifications. Second a considerable amount ... Cet article fournit une brève revue des principales questions théoriques et empiriques concernant le concept de NAIRU. Selon la littérature récente portant sur le marché du travail, le NAIRU est défini comme le taux de chômage qui stabilise l’inflation en l’absence de toutes surprises sur l’évolution des prix et des salaires. L’approche conventionnelle du taux de chômage d’équilibre suppose qu’à long terme, le NAIRU est uniquement déterminé par des facteurs d’offre affectant le marché du travail. On montre que des ajustements dynamiques relativement complexes peuvent exister même dans des modèles log-linéaires simples de formation des prix et des salaires. En outre, cet article passe en revue un certain nombre de “mécanismes d’hystérèse” pouvant provoquer des variations temporelles permanentes du taux de chômage d’équilibre, ce qui implique qu’un NAIRU de long terme peut ne pas exister.Outre les problèmes théoriques, il est mentionné que les applications quantitatives du concept ...

Date: 1997-01-01
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