Growth, Savings, and Unemployment.

Recent years have seen a rapid development of model connecting growth and unemployment, but their empirical relevance is not fully known. This paper develops a simple framework for testing a prediction shared by many growth-theoretic models of unemployment, namely, economic fundamentals other than labor market institutions (e.g. time preference) have non-neutral effect on unemployment. This prediction is tested against the null hypothesis of the long-run separability between growth and unemployment, namely, unemployment is unrelated with those growth fundamentals after controlling for labor market institutions. The data from the OECD countries overall reject the null hypothesis, arguably warranting the growth-theoretic approach.