Capital Investment and Unemployment in Europe: Neutrality or Not?

Driver, Ciaran; Muñoz-Bugarin, Jair

Abstract

Productivity variables are often said to have no effect on the NAIRU under wage bargaining as the labour share is unaffected when production is characterised by a unit elasticity of substitution. While production functions such as the CES can explain a negative relationship between investment and equilibrium unemployment, the implication then is that the labour share should increase with investment. In this paper we show that for a long sample in the UK, the labour share has decreased with capital investment. For a panel of European countries for which estimation is possible, the same result is obtained.

Citation

Driver, C., & Muñoz-Bugarin, J. (2010). Capital Investment and Unemployment in Europe: Neutrality or Not?. Journal of Macroeconomics, 32(1), 492-496. https://doi.org/10.1016/j.jmacro.2009.03.003

• Journal Article Type: Article
• Publication Date: Mar 1, 2010
• Deposit Date: Oct 22, 2010
• Journal: Journal of Macroeconomics
• Print ISSN: 0164-0704
• Electronic ISSN: 1873-152X
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 32
• Issue: 1
• Pages: 492-496
• DOI: https://doi.org/10.1016/j.jmacro.2009.03.003