Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/2802 
Year of Publication: 
2002
Series/Report no.: 
IZA Discussion Papers No. 530
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper provides a critique of the ?unemployment invariance hypothesis,? according to which the behavior of the labor market ensures that the long-run unemployment rate is independent of the size of the capital stock, productivity, and the labor force. Using Solow growth and endogenous growth models, we show that the labor market need not contain all the equilibrating mechanisms to ensure unemployment invariance and that other markets may perform part of the equilibrating process as well. By implication, policies that stimulate investment and R&D and policies that affect the size of the labor force may influence the long-run unemployment rate. Layard-Nickell-Jackman ?invariance condition? for labor market systems. This condition is meant to ensure that unemployment is not trended in response to growth in the capital stock, the labor force, or productivity.
Subjects: 
employment
wage determination
labor supply
capital accumulation
productivity
technological change
economic growth
unemployment
JEL: 
J21
J68
J64
J38
J30
J23
Document Type: 
Working Paper

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