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Unemployment Invariance

Author

Listed:
  • Karanassou Marika

    (University of London,London, United Kingdom of Great Britain and Northern Ireland)

  • Snower Dennis J.

    (University of London,London, Germany)

Abstract

This paper provides a critique of the ‘unemployment invariance hypothesis’, according to which the behavior of the labor market, by itself, ensures that the long-run unemployment rate is independent of the size of the capital stock, productivity and the labor force. In the context of an endogenous growth model, 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.

Suggested Citation

  • Karanassou Marika & Snower Dennis J., 2004. "Unemployment Invariance," German Economic Review, De Gruyter, vol. 5(3), pages 297-317, August.
    • Handle: RePEc:bpj:germec:v:5:y:2004:i:3:p:297-317
    DOI: 10.1111/j.1465-6485.2004.00110.x
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