This paper provides econometric evidence on the impact of labour market regulations on ('structural') unemployment rates. Based on a data set for 23 OECD countries over the time period 1985‑2013, the panel regression results suggest that standard institutional labour market indicators – such...

The natural rate hypothesis states that there exists an unemployment rate at which inflation is stable, and that this unemployment rate is independent of aggregate demand shocks. The hysteresis hypothesis, in contrast, states that the long run unemployment rate can be affected by aggregate...

Economic theory is prone to hysteresis. Once an idea is adopted, it is difficult to change. In the 1970s, the economics profession abandoned the Keynesian Phillips curve and adopted Milton Friedman's natural rate of unemployment (NRU) hypothesis. The shift was facilitated by a series of lucky...