Journal Article

Unemployment Invariance

Authors

  • Marika Karanassou
  • Dennis J. Snower
Publication Date

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.

Kiel Institute Expert

Info

JEL Classification
J21, J23, J30, J38, J64, J68

Key Words

  • capital accumulation
  • economic growth
  • employment
  • labor supply
  • productivity
  • Produktivität
  • technological change
  • Technologischer Wandel
  • unemployment
  • Wage Determination
  • Wirtschaftswachstum