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What's 'structural' about unemployment in Europe: On the Determinants of the European Commission's NAIRU Estimates

Author

Listed:
  • Jakob Kapeller

    (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)

  • Philipp Heimberger

    (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)

  • Bernhard Schuetz

    (Department of Economics, Johannes Kepler University Linz)

Abstract

This paper analyzes the determinants of the European Commission's NAIRU estimates for 14 European OECD countries during 1985-2012. The NAIRU is a poor proxy for 'structural unemployment': Labor market institutions - employment protection legislation, union density, tax wedge, minimum wages - underperform in explaining the NAIRU, while cyclical variables - capital accumulation and boom - bust patterns in housing markets - play an important role. This is relevant since the NAIRU is used to compute potential output and structural budget balances and, hence, has a direct impact on the scope and evaluation of fiscal policy in EU countries.

Suggested Citation

  • Jakob Kapeller & Philipp Heimberger & Bernhard Schuetz, 2016. "What's 'structural' about unemployment in Europe: On the Determinants of the European Commission's NAIRU Estimates," ICAE Working Papers 47, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    • Handle: RePEc:ico:wpaper:47
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    File URL: https://www.jku.at/fileadmin/gruppen/108/ICAE_Working_Papers/wp47.pdf
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    Cited by:

    1. repec:clr:wugarc:y:2016v:42i:03p:451 is not listed on IDEAS
    2. Ashwin Madhou & Tayushma Sewak, 2019. "Examining Structural Unemployment in Sub-Saharan Africa: Empirical Evidence from Unobserved Components," Open Economies Review, Springer, vol. 30(5), pages 895-904, November.
    3. Philipp Heimberger, 2016. "Das "strukturelle Defizit" in der österreichischen Budgetpolitik: Berechnungsprobleme, Revisionen und wirtschaftspolitische Relevanz," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 42(3), pages 451-463.

    More about this item

    Keywords

    NAIRU; potential output; fiscal policy coordination; unemployment in Europe; labor market flexibility;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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