10.1016/S1062-9769(00)00043-0">
 

Title

Labor quality, natural unemployment, and US inflation

Document Type

Article

Publication Date

2000

Department

Economics

Abstract

The recent combination of low inflation and low unemployment has led some to question whether the short-run, Phillips curve trade-off is dead. We argue that the improved trade-off has resulted, in part, from improved labor quality in the form of increased average years of work experience and education, and use these variables to calculate new estimates of the natural unemployment rate. Based on evidence from inflation equations, we find strong support for a time-varying natural unemployment rate, and find that our measure based on labor quality outperforms other leading measures of natural unemployment.