Stephen Nickell talks with
ScienceWatch.com and answers a few questions about
this month's Emerging Research Front Paper in the field of
Economics & Business.
Article: Unemployment in the OECD since the 1960s. What
do we know?
Authors: Nickell, S;Nunziata, L;Ochel, W
Journal: ECON J, 115 (500): 1-27 JAN 2005
Addresses: Bank England, Monetary Policy Comm, London,
Bank England, Monetary Policy Comm, London, England.
London Sch Econ, London, England.
Univ Oxford Nuffield Coll, Oxford OX1 1NF, England.
Why do you think your paper is so highly
There are several reasons. First, it is concerned with a topic, namely
unemployment, in which there is widespread interest across the Organisation
for Economic Co-operation and Development (OECD). Second, there are a
number of competing explanations of the differing patterns of unemployment
across OECD countries since the 1960s and there are many issues which are
far from settled. Third, the analysis concentrates on a difficult question,
namely explaining why longer-term changes in unemployment over time differ
dramatically across different countries.
This contrasts with the much easier question, which is, why unemployment
remains, on average, much higher in some countries than in others. There
are many plausible explanations of the cross-section variation, but
explaining the different time-series variations has proved much trickier.
Does it describe a new discovery, methodology or
synthesis of knowledge?
This is one of the first papers which attempted to explain long-term
changes in unemployment by examining long-term changes in labor market
institutions. It also demonstrates that, once we allow for long-term
changes in labor market institutions, there remains little role for
interactions between shocks and institutions. This latter has formed the
basis of a strong strand of explanation in the previous literature.
Would you summarize the significance of your paper in
"...it is worth remarking that while labor market
reforms will help reduce
average unemployment over the business cycle, they
are not particularly germane when it
comes to dealing with the sort of macroeconomic
shocks which all countries are currently
Ever since the dramatic rise in unemployment in the 1970s and early 1980s
across much of the OECD, there has been an explosion of research aiming to
understand what was going on and to isolate what kind of policies would
help reduce average levels of unemployment across the business cycle to
more acceptable levels.
One strand of this research, set out in a book which I coauthored with
Richard Layard and Richard Jackman: Unemployment: Macroeconomic
Performance and the Labour Market, (1991) and subsequently taken up by
the OECD, emphasized the notion that some labor market institutions tended
to generate higher levels of unemployment.
Examples of this might be the structure of the unemployment benefit system,
labor taxes, the structure of employment protection legislation and the
role of trade unions in the operation of the labor market.
The aim of this research, as exemplified by this paper, is to indicate what
sort of labor market reforms might help reduce unemployment in the longer
term. (Reference: R. Layard, S. Nickell and R. Jackman ,
Unemployment: Macroeconomic Performance and the Labour Market,
Oxford University Press, Second edition, 2005).
How did you become involved in this research and were
any particular problems encountered along the way?
I became interested in various aspects of the relationship between labor
market institutions and the workings of the labor market in the late 1970s.
In 1984, Richard Layard and I were asked by Her Majesty's Treasury to mount
a serious investigation of the very high levels of unemployment then ruling
in the UK, with a view toward suggesting policies which might help.
Our investigations ultimately resulted in the 1991 book mentioned above, as
well as a great deal of subsequent work. A major difficulty which we faced
in the 1980s was the absence of coherent international data which captured
the relevant features of labor market institutions. Thanks to many
individual researchers and particularly to a group of economists in the
OECD, the situation has continued gradually to improve. Indeed,
improvements are still being made even to this day.
Where do you see your research leading in the
While my own research in this area has been winding down, the overall
issues are still very much alive. It is probably correct to say that the
general thrust of policy-making in this field is in accord with the ideas I
have been involved in developing since the mid-1980s. The weight of
research has, however, moved from studying what sort of policies work to
studying why it appears to be so difficult to introduce such policies, at
least in some countries. So the shift has been away from purely economic
considerations to the political economy of labor market reform, a subject
area beyond my personal compass.
Do you foresee any social or political implications for
Given the subject matter, the social and political implications are plain.
Countries such as Denmark, the Netherlands, and Sweden have been pursuing
the sort of labor market reforms consistent with the work described above
with considerable success. But, in some European countries, there is
plainly a long way to go.
Finally, it is worth remarking that while labor market reforms will help
reduce average unemployment over the business cycle, they are not
particularly germane when it comes to dealing with the sort of
macroeconomic shocks which all countries are currently experiencing. Strong
and effective expansionary macroeconomic policy is the only effective
answer in this regard.
Stephen Nickell, CBE, FBA
Professor of Economics
Warden of Nuffield College
University of Oxford
Oxford, UK Web