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Short and Long Effects of Productivity on Unemployment

Author

Listed:
  • Pu Chen

    (Melbourne Institute of Technology)

  • Willi Semmler

    (New School
    University of Bielefeld)

Abstract

Okun’s (1962) seminal paper is an important study on economic growth and unemployment but a detailed exploration of the effect of productivity growth on unemployment has been left aside. Yet, the relationship between productivity growth and unemployment has been debated since long. In this paper we present stylized facts on the link between productivity growth and unemployment for the short and long run, and present model variants that demonstrate that in the short run productivity growth may increase unemployment while in the long run the relationship between productivity growth and unemployment are likely to co-vary negatively. Using US data, empirically we decompose the time series of unemployment rate and productivity growth into long run and short run components and show empirical evidence that the long run and short run components co-vary as predicted by some theories.

Suggested Citation

  • Pu Chen & Willi Semmler, 2018. "Short and Long Effects of Productivity on Unemployment," Open Economies Review, Springer, vol. 29(4), pages 853-878, September.
    • Handle: RePEc:kap:openec:v:29:y:2018:i:4:d:10.1007_s11079-018-9486-z
    DOI: 10.1007/s11079-018-9486-z
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    Cited by:

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    2. Valentina Diana Rusu & Adina Dornean, 2019. "The Quality of Entrepreneurial Activity and Economic Competitiveness in European Union Countries: A Panel Data Approach," Administrative Sciences, MDPI, vol. 9(2), pages 1-21, April.
    3. Ferraresi Tommaso & Roventini Andrea & Semmler Willi, 2019. "Macroeconomic Regimes, Technological Shocks and Employment Dynamics," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(4), pages 599-625, August.
    4. Kotz Hans-Helmut & Semmler Willi & Tahri Ibrahim, 2018. "Financial fragmentation and the monetary transmission mechanism in the euro area: a smooth transition VAR approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(5), pages 1-19, December.
    5. Nauro Campos & Karim Aynaoui & Davide Furceri & Prakash Loungani, 2018. "Slow Recovery to Nowhere? Labor Market Issues in Advanced Economies: Introduction," Open Economies Review, Springer, vol. 29(4), pages 695-701, September.

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    More about this item

    Keywords

    Okun’s law; Technological unemployment; Multi-regime study;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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