The capital stock and equilibrium unemployment: a new theoretical perspective
By assuming Cobb-Douglas production technology, many well-known imperfectly competitive macroeconomic models of the labour market (e.g. Layard, Nickell and Jackman, 1991) imply that equilibrium unemployment is independent of the capital stock. This paper introduces a new notion of capacity into the...
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| Format: | Working paper |
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University of Oxford
2003
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| _version_ | 1826261567111430144 |
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| author | Kapadia, S |
| author_facet | Kapadia, S |
| author_sort | Kapadia, S |
| collection | OXFORD |
| description | By assuming Cobb-Douglas production technology, many well-known imperfectly competitive macroeconomic models of the labour market (e.g. Layard, Nickell and Jackman, 1991) imply that equilibrium unemployment is independent of the capital stock. This paper introduces a new notion of capacity into the standard framework. Specifically, we adapt the Cobb-Douglas production function so that when the capital-labour ratio drops below a certain threshold, the returns to labour fall while the returns to capital increase. Using this assumption, we show that equilibrium unemployment depends on the capital stock over a certain range. We also briefly discuss the generalisation for an endogenous capital stock. |
| first_indexed | 2024-03-06T19:23:23Z |
| format | Working paper |
| id | oxford-uuid:1ae27d77-9a5f-4e9e-858c-b924c2ebe144 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T19:23:23Z |
| publishDate | 2003 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:1ae27d77-9a5f-4e9e-858c-b924c2ebe1442022-03-26T10:57:14ZThe capital stock and equilibrium unemployment: a new theoretical perspectiveWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:1ae27d77-9a5f-4e9e-858c-b924c2ebe144Bulk import via SwordSymplectic ElementsUniversity of Oxford2003Kapadia, SBy assuming Cobb-Douglas production technology, many well-known imperfectly competitive macroeconomic models of the labour market (e.g. Layard, Nickell and Jackman, 1991) imply that equilibrium unemployment is independent of the capital stock. This paper introduces a new notion of capacity into the standard framework. Specifically, we adapt the Cobb-Douglas production function so that when the capital-labour ratio drops below a certain threshold, the returns to labour fall while the returns to capital increase. Using this assumption, we show that equilibrium unemployment depends on the capital stock over a certain range. We also briefly discuss the generalisation for an endogenous capital stock. |
| spellingShingle | Kapadia, S The capital stock and equilibrium unemployment: a new theoretical perspective |
| title | The capital stock and equilibrium unemployment: a new theoretical perspective |
| title_full | The capital stock and equilibrium unemployment: a new theoretical perspective |
| title_fullStr | The capital stock and equilibrium unemployment: a new theoretical perspective |
| title_full_unstemmed | The capital stock and equilibrium unemployment: a new theoretical perspective |
| title_short | The capital stock and equilibrium unemployment: a new theoretical perspective |
| title_sort | capital stock and equilibrium unemployment a new theoretical perspective |
| work_keys_str_mv | AT kapadias thecapitalstockandequilibriumunemploymentanewtheoreticalperspective AT kapadias capitalstockandequilibriumunemploymentanewtheoreticalperspective |