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

Pierpaolo Benigno; Luca Ricci; Paolo Surico

doi:10.1162/rest_a_00508

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

Pierpaolo Benigno¹; Luca Ricci²; Paolo Surico³

¹ Libera Università Internazionale degli Studi Sociali Guido Carli · ² International Monetary Fund · ³ London Business School

The Review of Economics and Statistics 2015 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.

DOI: 10.1162/rest_a_00508
Volume: 97 (3)
Pages: 698-709
Language: en
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