The NAIRU determinants: what?s structural about unemployment in Europe?
Sprache des Titels:
This paper analyzes the determinants of the European Commission?s estimates of the non-accelerating inflation rate of unemployment (NAIRU) for 14 European countries during 1985?2012. The NAIRU is a poor proxy for ?structural unemployment?. Labor market institutions ? employment protection legislation, union
density, tax wedge, minimum wages ? underperform in explaining the NAIRU, while cyclical variables ?
capital accumulation and boom-bust patterns in housing markets ? play an important role. This finding is
policy-relevant since the NAIRU is used to compute potential output and structural budget balances and,
hence, has a direct impact on scope and evaluation of fiscal policies in Europe.