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Equilibrium Unemployment in Australia: Concepts and Measurement *
Author(s) -
TRIVEDI P. K.,
BAKER G. M.
Publication year - 1985
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1985.tb02018.x
Subject(s) - stylized fact , unemployment , economics , market clearing , general equilibrium theory , aggregate (composite) , clearing , keynesian economics , full employment , aggregate demand , macroeconomics , simple (philosophy) , econometrics , monetary policy , philosophy , materials science , finance , epistemology , composite material
This paper reviews some concepts of equilibrium unemployment and outlines the fundamental difficulties facing any attempt to produce estimates of the equilibrium rate of unemployment. It develops simple quasi‐reduced form models of aggregate unemployment based on rival non market‐clearing and market‐clearing theories. These equations form the basis of an empirical model of aggregate unemployment in Australia since 1969. The empirical evidence suggests that most of the observed increase in unemployment can be attributed to cyclical rather than structural‐frictional factors. However, stylized explanations of cyclical unemployment exclusively along the lines of Keynesian, Classical or equilibrium search theory are found inadequate.