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Principal Investigator(s): Wall, Howard J., Federal Reserve Bank of St. Louis; Zoega, Gylfi, University of Iceland. University of London. Central Bank of Iceland
Estimates of the natural rate of unemployment are important in many macroeconomic models used by economists and policy advisors. This paper shows how such estimates might benefit from closer attention to regional developments. Regional business cycles do not move in lock-step, and greater dispersion among regions can affect estimates of the natural rate of unemployment. There is microeconomic evidence that employers are more reluctant to cut wages than they are to raise them. Accordingly, the relationship between wage inflation and vacancies is convex: An increase in vacancies raises wage inflation at an increasing rate. The authors' empirical results are consistent with this and indicate that if all else had remained constant, the reduction in the dispersion of regional unemployment rates between 1982 and 2000 would have meant a two-percentage-point drop in the natural rate of aggregate unemployment.
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Wall, Howard J., and Gylfi Zoega. U.S. Regional Business Cycles and the Natural Rate of Unemployment. ICPSR01296-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2004-08-12. doi:10.3886/ICPSR01296.v1
Persistent URL: http://doi.org/10.3886/ICPSR01296.v1
Scope of Study
Geographic Coverage: United States
Data Collection Notes:
Files submitted are data file 0401hwd.xls and the program file 0401hwp.txt. These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.
Original ICPSR Release: 2004-08-12
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