Is There an Equilibrium Rate of Unemployment in the Long Run?
Engelbert Stockhammer ()
Working Papers from Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness
Distinguishing between profit led and growth led demand regimes, we analyze the conditions of existence and stability of long run equilibrium of unemployment. The model we employ has at its center the relation between growth and distribution. Growth can be either wage led or profit led. Distribution itself is a function of the unemployment rate, with higher unemployment leading to a higher profit share. We use Okun's Law to close the model, making the change of the rate of unemployment a function of growth. The interesting result of our analysis is that in profit led demand regime the short run and long run equilibrium are stable. However, if the demand regime is wage led, the same conditions that guarantee stability of the goods market equilibrium in the short run render impossible the existence of a long run equilibrium rate of unemployment, and vice versa. Thus, if Kalecki's proposition that higher wages lead to higher growth is true, there will be no equilibrium rate of unemployment in the long run that serves as an anchor for the economic system. A revised version of the paper is forthcoming in the Review of Political Economy. Please contact the author for the revised version.
Keywords: growth theory; unemployment; keynesian economics (search for similar items in EconPapers)
JEL-codes: E12 E24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-ltv
Note: PDF Document
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wu-wien.ac.at/inst/vw1/gee/papers/gee!wp10.pdf [301 Moved Permanently]--> https://www.wu.ac.at/inst/vw1/gee/papers/gee!wp10.pdf)
Journal Article: Is there an equilibrium rate of unemployment in the long run? (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwgee:geewp10
Access Statistics for this paper
More papers in Working Papers from Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by Department of Economics ().