Production Constraints and the Nairu
17 Pages Posted: 18 Dec 2010
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Production Constraints and the Nairu
Production Constraints and the Nairu
Date Written: 2008
Abstract
This paper argues that the production constraints in the basic NAIRU model should be distinguished by type: capital constraints and labour constraints. It notes the failure to incorporate this phenomenon in standard macro models. Using panel data for UK manufacturing over 80 quarters we show that capital constraints became relatively more important during the 1980s as industry failed to match the increase in labour flexibility with rising capital investment. --
Keywords: Capital, labour, constraints, NAIRU, panel data, structural breaks
JEL Classification: C23, D24, E22, E24
Suggested Citation: Suggested Citation
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