Unemployment and productivity in the long-run: The role of macroeconomic volatility

Benigno, P, Ricci, L A and Surico, P (2015) Unemployment and productivity in the long-run: The role of macroeconomic volatility. Review of Economics and Statistics, 97 (3). pp. 698-709. ISSN 0034-6535

Abstract

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.