Unemployment Persistence and Capital Shortage: The Case of Trinidad and Tobago

June 1, 1997

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Benedikt Braumann. Unemployment Persistence and Capital Shortage: The Case of Trinidad and Tobago, (USA: International Monetary Fund, 1997) accessed January 22, 2025

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the link between capital stock and unemployment persistence. An overlapping-generations model with endogenous labor supply and imperfect competition is presented. It is used to interpret the unusual persistence of unemployment in Trinidad and Tobago during the last twenty years. Although real wages are 60 percent lower today than in the mid-1980s, unemployment continues to be very high. The paper argues that an important part of the explanation lies in the decline of capital stock in this country after years of very low savings and investment. Policies to address this capital shortage are discussed.

Subject: Employment, Financial institutions, Labor, Real wages, Stocks, Unemployment

Keywords: Capital shortage, Employment, Equilibrium unemployment, Europe, Gross investment, Investment, Labor market, Marginal product of labor, Monopolistic competition, Overlapping generations, Real wages, Savings, Stocks, Terms of trade, Unemployment, Unemployment persistence, Utility function, Wage earnings, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/077
Stock No:

WPIEA0771997
ISBN:

9781451956719
ISSN:

1018-5941

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