Production Constraints and the NAIRU

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.

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Year of publication:	2008
Authors:	Hall, Stephen G. ; Driver, Ciaran F.
Published in:	Economics - The Open-Access, Open-Assessment E-Journal. - Institut für Weltwirtschaft (IfW), ISSN 1864-6042. - Vol. 2.2008, 2008-11, p. 1-15
Publisher:	Institut für Weltwirtschaft (IfW)
Subject:	Capital \| labour \| constraints \| NAIRU \| panel data \| structural breaks

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Other identifiers:	10.5018/economics-ejournal.ja.2008-11 [DOI]
Classification:	C23 - Models with Panel Data ; D24 - Production; Capital and Total Factor Productivity; Capacity ; E22 - Capital; Investment (including Inventories); Capacity ; E24 - Employment; Unemployment; Wages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005083000