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Unemployment, Capital-Labor Substitution, and Economic Growth
Author:
Mr. Bob Rowthorn null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1999: Issue 043
Language:
English
Publication Date:
01 Mar 1999
DOI:
https://doi.org/10.5089/9781451846300.001
ISBN:
9781451846300
ISSN:
1018-5941
Pages:
38
Keywords:
WP; demand curve; capital stock; product market; capital formation; equilibrium unemployment; Unemployment; Capital; Elasticity of Substitution; Bargaining; Technical Progress; money wage; impact wage settlement; wage cut; wage bargainer; wage-price spiral; wage determination; wage rate; Wages; Real wages; Labor demand; Employment; Europe
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper discusses the influence of economic growth on the equilibrium unemployment rate (NAIRU). It examines how income distribution and the NAIRU are influenced by capital formation, technical progress, and labor force expansion, and how these factors’ impact depends on the elasticity of substitution between capital and labor. The paper distinguishes between the short-run NAIRU when capital stock is exogenous, and the long-run NAIRU when it is endogenous. It also considers how the analysis must be modified to take into account Keynesian ideas concerning the role of aggregate demand. It concludes that unless the capital stock grows in line with labor supply in efficiency units, the short-run NAIRU will increase, reducing the scope for demand stimulation.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund