Unemployment dynamics with international capital mobility |
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Authors: | Costas Azariadis |
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Institution: | a University of California, Los Angeles, USA b Centre for Economic Performance, London School of Economics and CEPR, UK |
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Abstract: | We study the response of domestic unemployment rates to shocks in total factor productivity for economies with high capital mobility and low labour mobility. We show that high capital mobility amplifies the impact on the domestic unemployment rate of domestic fluctuations in total factor productivity, shortens the lag of the response to shocks and raises the variability of unemployment. But average unemployment is unaffected. Capital flows increase the riskiness of labour income and reduce the riskiness of capital income but do not reduce mean welfare. |
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Keywords: | E24 E32 F21 J64 |
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