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Unemployment and Productivity in the Long Run: The Role of Macroeconomic Volatility

The Review of Economics and Statistics 2015 97(3), 698-709 open access
This paper presents a new empirical regularity between the volatility of productivity growth and long-run unemployment for a given level of long-run productivity growth. A theoretical framework based on asymmetric real wage rigidities is shown to have the potential to rationalize this finding. The model tends to fit U.S. long-run unemployment better than a specification based on long-run productivity growth only, especially during the Great Moderation and the Great Recession.