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Can Productivity Growth Explain the NAIRU? Long‐Run Evidence from Britain, 1871–1999

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  • TIMOTHY J. HATTON

Abstract

This paper investigates the effect of productivity growth on the non‐accelerating inflation rate of unemployment (NAIRU) over the long run, using historically consistent time series for the UK from 1871 to 1999. A two‐equation model of unemployment and wage‐setting that incorporates productivity effects is estimated over the whole period, allowing for shifts associated with changes in labour market institutions. The results indicate that faster productivity growth reduces the NAIRU, but that this goes only part of the way towards explaining wide swings in average unemployment across the decades.

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  • Timothy J. Hatton, 2007. "Can Productivity Growth Explain the NAIRU? Long‐Run Evidence from Britain, 1871–1999," Economica, London School of Economics and Political Science, vol. 74(295), pages 475-491, August.
    • Handle: RePEc:bla:econom:v:74:y:2007:i:295:p:475-491
    DOI: 10.1111/j.1468-0335.2006.00548.x
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    Cited by:

    1. Gylfi Zoega, 2012. "Employment and asset prices," Applied Economics, Taylor & Francis Journals, vol. 44(26), pages 3343-3355, September.
    2. Marika Karanassou & Hector Sala, 2012. "Inequality and Employment Sensitivities to the Falling Labour Share," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 343-376.
    3. Sambit Bhattacharyya & Jeffrey G. Williamson, 2011. "Commodity Price Shocks And The Australian Economy Since Federation," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 51(2), pages 150-177, July.
    4. Dario JUDZIK & Hector SALA, 2013. "Productivity, deunionization and trade: Wage effects and labour share implications," International Labour Review, International Labour Organization, vol. 152(2), pages 205-236, June.
    5. Hegeland, Erik & Taalbi, Josef, 2019. "What determines unemployment in the long run? Band spectrum regression on ten countries," Lund Papers in Economic History 203, Lund University, Department of Economic History.
    6. Ron Smith & Gylfi Zoega, 2004. "Global Shocks and Unemployment Adjustment," Economics wp24_smith, Department of Economics, Central bank of Iceland.
    7. Marika Karanassou & Hector Sala, 2012. "Productivity Growth And The Phillips Curve: A Reassessment Of The Us Experience," Bulletin of Economic Research, Wiley Blackwell, vol. 64(3), pages 344-366, July.
    8. Ambrocio, Gene & Jang, Tae-Seok, 2009. "Productivity shocks and the New Keynesian Phillips Curve: Evidence from US and Euro area," Kiel Advanced Studies Working Papers 453, Kiel Institute for the World Economy (IfW Kiel).
    9. George Chouliarakis & Mónica Correa-López, 2009. "A Fair Wage Model of Unemployment with Inertia in Fairness Perceptions," Centre for Growth and Business Cycle Research Discussion Paper Series 130, Economics, The University of Manchester.
    10. Karanassou, Marika & Sala, Hector, 2010. "The Wage-Productivity Gap Revisited: Is the Labour Share Neutral to Employment?," IZA Discussion Papers 5092, Institute of Labor Economics (IZA).
    11. Hegelund, Erik & Taalbi, Josef, 2023. "What determines unemployment in the long run? Band spectrum regression on ten countries 1913–2016," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 144-167.
    12. C.W.M. Naastepad & Servaas Storm, 2010. "Feasible Egalitarianism: Demand-led Growth, Labour and Technology," Chapters, in: Mark Setterfield (ed.), Handbook of Alternative Theories of Economic Growth, chapter 15, Edward Elgar Publishing.
    13. Junichi Fujimoto, 2008. "Implications of General and Specific Productivity Growth in a Matching Model," 2008 Meeting Papers 584, Society for Economic Dynamics.
    14. Timothy J. Hatton & Mark Thomas, 2010. "Labour markets in the interwar period and economic recovery in the UK and the USA," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(3), pages 463-485, Autumn.
    15. Timothy J. Hatton & Mark Thomas, 2012. "Labour Markets in Recession and Recovery: The UK and the USA in the 1920s and 1930s," CEH Discussion Papers 001, Centre for Economic History, Research School of Economics, Australian National University.
    16. Roberto Bande & Marika Karanassou & Héctor Sala, 2019. "Employment in Spanish regions: cost-control or growth-enhancing policies?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 601-635, June.
    17. Marika Karanassou & Hector Sala, 2012. "Inequality and Employment Sensitivities to the Falling Labour Share," The Economic and Social Review, Economic and Social Studies, vol. 43(3), pages 343-376.
    18. Sakiru Adebola Solarin, 2017. "Testing for the Stationarity in Total Factor Productivity: Nonlinearity Evidence from 79 Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(1), pages 141-158, March.
    19. Antonio Ribba, 2016. "Productivity Growth Shocks and Unemployment in the Postwar US Economy," Department of Economics 0077, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    20. George Chouliarakis & Mónica Correa-López, 2014. "A fair wage model of unemployment with inertia in fairness perceptions," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 88-114, January.
    21. Molinder, Jakob, 2019. "Why Was Unemployment so Low in Postwar Sweden? An Analysis with New Unemployment Data by Manufacturing Industry, 1935-1948," Lund Papers in Economic History 201, Lund University, Department of Economic History.
    22. Marika Karanassou & Hector Sala, 2010. "The Wage-Productivity Gap Revisited: Is the Labour Share Neutral to Employment?," Working Papers 668, Queen Mary University of London, School of Economics and Finance.
    23. Antonio Rodriguez-Gil, 2018. "Hysteresis and labour market institutions. Evidence from the UK and the Netherlands," Empirical Economics, Springer, vol. 55(4), pages 1985-2025, December.
    24. Marika Karanassou & Hector Sala, 2012. "Productivity Growth And The Phillips Curve: A Reassessment Of The Us Experience," Bulletin of Economic Research, Wiley Blackwell, vol. 64(3), pages 344-366, July.

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-

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