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- Title
EQUILIBRIUM UNEMPLOYMENT WITH CAPITAL INVESTMENTS UNDER LABOUR MARKET IMPERFECTIONS.
- Authors
KOSKELA, ERKKI; STENBACKA, RUNE; JUSELIUS, MIKAEL
- Abstract
We study the effects of labour market imperfections and the capital stock on equilibrium unemployment. With an exogenous capital-labour ratio, stronger labour market imperfections promote equilibrium unemployment. However, the relationship between the long-run unemployment and the capital stock is not monotonic. With sufficiently strong (weak) labour market imperfections capital investment has a wage-moderating (wage-increasing) effect, thereby decreasing (increasing) equilibrium unemployment. Empirically we find dispersed long-run effects of capital on unemployment, using 28 years of quarterly data, in 16 OECD countries. A significant part of this dispersion can be explained by differences in labour market conditions among the countries.
- Subjects
UNEMPLOYMENT; CAPITAL investments; LABOR market; EQUILIBRIUM; WAGES
- Publication
Finnish Economic Papers, 2013, Vol 26, Issue 2, p72
- ISSN
0784-5197
- Publication type
Article