Unemployment Invariance

Marika Karanassou and Dennis J. Snower
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Marika Karanassou: Queen Mary, University of London
Dennis J. Snower: Birkbeck, University of London

No 476, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: This paper provides a critique of the "unemployment invariance hypothesis", according to which the behavior of the labor market ensures that the long-run unemployment rate is independent of the size of the capital stock, productivity, and the labor force. Using Solow growth and endogenous growth models, we show that the labor market alone need not contain all the equilibrating mechanisms to ensure unemployment invariance; in particular, other markets may perform part of the equilibrating process as well. By implication, policies that raise the growth path of capital or increase the effective working-age population may influence the long-run unemployment rate.

Keywords: Unemployment; Employment; Wage determination; Labor supply; Capital accumulation; Productivity; Technological change; Economic growth (search for similar items in EconPapers)
JEL-codes: J21 J23 J30 J38 J64 J68 (search for similar items in EconPapers)
Date: 2002-12-01
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:476

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