Unemployment Equilibria and Input Prices: Theory and Evidence from the United States

This paper develops an efficiency-wage model where input prices affect the equilibrium rate of unemployment. We show that a simple framework based on only two prices (the real price of oil and the real rate of interest) is able to explain the main post-war movements in the rate of U.S. joblessness. The equations do well in forecasting unemployment many years out-of-sample, and provide evidence that the oil-price spike associated with Iraq’s invasion of Kuwait appears to be a component of the “mystery” recession which followed.


Issue Date:
Jan 01 1998
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/268778
Language:
English
Total Pages:
25
JEL Codes:
E24; E32




 Record created 2018-02-26, last modified 2018-02-27

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)