Tag Archives: unemployment

Distinguishing demand effects and supply effects

Greg Mankiw has today highlighted how Bryan Caplan discusses fundamental inconsistencies in arguments over the minimum wage.

In some of his research, joint with Alan Krueger, Card finds that increases in the minimum wage have negligible effects on employment.  In other research, on the Mariel boatlift, Card finds that increases in the supply of unskilled workers have negligible effects on wages and employment of existing workers.

Caplan notes that these results are hard to reconcile: The former suggests that labor demand is highly inelastic, whereas the latter suggests it is highly elastic. Continue reading

The continuing relevance of the Phillips curve

The Phillips curve is an indication of the relationship between unemployment and inflation. The curve is named after AWH Phillips, who discovered the existence of this relationship when looking at UK data between the years 1861 and 1957. The curve shows that as unemployment rises, the rate of inflation can be observed to be lower, and vice versa. The relationship was similar for other developed countries.  Continue reading