Stockhammer, Engelbert, Guschanski, Alexander and Kohler, Karsten (2014) Unemployment, capital accumulation and labour market institutions in the Great Recession. (Working Paper) Post-Keynesian Economics Study Group. 18 p. (Working Papers, no. PKWP1411)

Abstract

The paper restates the post-Keynesian view of unemployment within a NAIRU framework. In the short run the private effective labour demand need not be downward sloping because of debt deflation and wage-led demand regimes. In the medium run the NAIRU will be endogenous because of the social norm character of wage setting and the supply-side effects of capital accumulation. Capital investment rather than labour market institutions is the crucial variable that explains changes in unemployment performance. We provide econometric evidence that the post-Keynesian view holds up well in the recession following the crisis 2008.

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