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Vicious and virtuous circles: the political economy of unemployment in interwar UK and USA

Matthews, Kent, Minford, Patrick and Naraidoo, Ruthira 2006. Vicious and virtuous circles: the political economy of unemployment in interwar UK and USA. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

This paper develops a political economy model of multiple unemployment equilibria to provide a theory of an endogenous natural rate of unemployment. This model is applied to the UK and the US interwar period which is remembered as the decade of mass unemployment. The theory here sees the natural rate and the associated path of unemployment as a reaction to shocks (mainly demand in nature) and the institutional structure of the economy. The channel through which these two forces feed on each other is a political economy process whereby voters with limited information on the natural rate react to shocks by demanding more or less social protection. The reduced form results obtained confirm a pattern of unemployment behaviour in which unemployment moves between high and low equilibria in response to shocks.

Item Type: Monograph (Working Paper)
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
Publisher: Cardiff University
Date of First Compliant Deposit: 30 March 2016
Last Modified: 04 Jun 2017 08:25
URI: http://orca.cf.ac.uk/id/eprint/77729

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