Unemployment, capital accumulation and labour market institutions in the Great Recession

Stockhammer, Engelbert, Guschanski, Alexander and Kohler, Karsten (2014) Unemployment, capital accumulation and labour market institutions in the Great Recession. European Journal of Economics and Economic Policies: Intervention, 11(2), pp. 182-194. ISSN (print) 2052-7764

Official URL: http://dx.doi.org/10.4337/ejeep.2014.02.05

Abstract

This 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 of 2008.

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