Year: 2009
Type: dissertation
Abstract: (PDF)Diss.The purpose of this thesis is to review the distinct conceptions of the labour market offered by the major approaches dealing with the macroeconomics of the labour market and provide information on the main driving forces shaping unemployment in Denmark, Finland and Sweden according to the chain reaction theory.The thesis consists of an introductory chapter and four essays.The first essay deals with three major approaches to the macroeconomics of the labour market: (i) the frictionless equilibrium view of unemployment; (ii) the hysteresis hypothesis; and (iii) the chain reaction theory (CRT), or prolonged adjustment view, of unemployment.It argues that the CRT is not simply the middle ground between the frictionless equilibrium view and the hysteresis hypothesis since it explains the unemployment problem by recognising the interaction of growth and dynamics in the labour market.The second essay reassesses the role of the natural rate of unemployment (NRU) in policy making and argues that in the presence of frictional growth unemployment does not gravitate towards the NRU -instead, it can be described as chasing after a moving target.This essay focuses on Denmark and shows that the NRU can only explain one third of the variation in unemployment, while frictional growth accounts for the remaining two thirds.The third essay focuses on the relationship between capital stock and unemployment and shows that capital accumulation can explain the diverse unemployment experiences of the Nordic countries.It shows that capital stock explains around 30% of the Danish unemployment increase in the aftermath of the oil price shocks and near 15% of the increase in the crisis of the early 1990s.In Sweden, capital accumulation contributes to 50% of the unemployment upsurge during the 1990s.Finally, the unemployment rate in Finland would have been 5 percentage points lower without the 1992 permanent drop of its capital stock growth rate.The fourth essay provides an account of the unemployment performance of Denmark, Finland, and Sweden since the 1980s.It explores the unemployment effects of different explanatory variables in four different periods and examines the adjustment process of the unemployment rate to a temporary shock to capital stock.This essay shows that capital stock had an important role in the unemployment trajectory of the three Nordic countries and that the external sector significantly influenced the Finnish unemployment trajectory.Finally, it shows that it takes several years before a temporary shock is completely absorbed by the labour market.In particular, Finland experienced the greatest initial impact of the shock and the shock was far more persistent.
Author: Pablo F. Salvador
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
Funder: Jyväskylän Yliopisto
OpenAlex ID: W2276826684