Unemployment equilibria and input prices: theory and evidence from the United States
Carruth, Alan A. , Hooker, Mark A. and Oswald, Andrew J. (1998) Unemployment equilibria and input prices: theory and evidence from the United States. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.496).
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This paper develops an efficiency-wage model where input prices affect the equilibrium rate of unemployment. We show that a simple framework based on only two prices (the real price of oil and the real rate of interest) is able to explain the main post-war movements in the rate of U.S. joblessness. The equations do well in forecasting unemployment many years out-of-sample, and provide evidence that the oil-price spike associated with Iraq’s invasion of Kuwait appears to be a component of the “mystery” recession which followed.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HD Industries. Land use. Labor|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Unemployment -- United States, Unemployment -- Mathematical models, Interest rates -- United States, Petroleum products -- Prices -- United States, United States -- Economic conditions -- 20th century|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||January 1998|
|Number of Pages:||25|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Economic and Social Research Council (Great Britain) (ESRC), Leverhulme Trust (LT), London School of Economics and Political Science (LSE)|
Akerlof, George A., and Janet L. Yellen, “The Fair Wage-Effort Hypothesis and Unemployment,” Quarterly Journal of Economics 105 (1990), 255-83.
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