Capital accumulation and unemployment: New insights in the Nordic experience

Arbeitspapier

This paper takes a fresh look at the analysis of labour market dynamics and argues that capital accumulation plays a fundamental role in shaping unemployment movements. This role has generally been examined by considering indirect transmission channels of the capital stock effects, i.e. using variables like interest rates or investment ratios in the estimation of single-equation unemployment rate models. Here we advocate a different approach. We directly estimate the effects of capital stock in the labour market by applying the chain reaction theory of unemployment, and we find that capital stock is a major determinant of unemployment in the Nordic countries. In particular, the different unemployment experiences of these economies derive from the temporary (albeit prolonged) negative shocks to capital stock growth in Denmark and Sweden, and the permanent downturn of capital stock growth in Finland. We are thus able to explain why the crisis of the early 1990s had a more accute impact in Finland than in its twin economy, Sweden.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 611

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Labor Force and Employment, Size, and Structure
• Subject: Unemployment dynamics ; Chain reaction theory ; Capital accumulation ; Nordic countries ; Gesamtwirtschaftliches Anlagevermögen ; Investition ; Arbeitslosigkeit ; Dänemark ; Finnland ; Schweden

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karanassou, Marika ; Sala, Hector ; Salvador, Pablo F.
• Event: Veröffentlichung
• (who): Queen Mary University of London, Department of Economics
• (where): London
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/62901
• Last update: 10.03.2025, 11:44 AM CET