The paper restates the post-Keynesian view of unemployment within a NAIRU framework. In the short run the private effective labour demand need not be downward sloping because of debt deflation and wage-led demand regimes. In the medium run the NAIRU will be endogenous because of the social norm character of wage setting and the supply-side effects of capital accumulation. Capital investment rather than labour market institutions is the crucial variable that explains changes in unemployment performance. We provide econometric evidence that the post-Keynesian view holds up well in the recession following the crisis 2008.
Keywords: Unemployment, NAIRU, Post Keynesian economics, panel analysis
JEL classification: E12: General Aggregative Models: Keynes; Keynesian; Post-Keynesian E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity E25: Aggregate Factor Income Distribution
Download: Working Paper PKWP1406