We propose a theory of low-frequency movements in unemployment based on asymmetric real wage rigidities. The theory … generates two main predictions: long-run unemployment increases with (i) a fall in long-run productivity growth and (ii) a rise …-run unemployment over the 1980s and its rise during the late 2000s. …

-elasticity-of-substitution (CES) production function, and adjustments in employment both at the intensive as well as the extensive margin. The …