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Productivity and unemployment: an ABM approach

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Abstract

We investigate the relationship between productivity and unemployment with an ABM approach. In particular, we use the framework of Riccetti et al. (J Econ Interact Coord 10(2):305–332, 2015) to run computer simulations considering different levels of productivity and analyse the corresponding effects on unemployment. The simulation results show the emergence of a fluctuating pattern of the unemployment rate, the public deficit and the inflation rate as functions of productivity. The marked pattern of the unemployment rate in the model is empirically validated by the OECD database. This unexpected oscillating behaviour remains in subsequent simplifications of the baseline model. Thus, our approach allows us to explain the productivity–employment linkage as an emergent macroeconomic property of a complex system. We conclude that economic policies aimed at increasing labour productivity could have unintended side effects on the unemployment rate, the government deficit and the inflation rate, which should be explored and taken into account before the policy is implemented.

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Notes

  1. We consider yearly data from the OECD for different countries. In the OECD database (https://data.oecd.org/), labour productivity is calculated by the ratio between GDP (measured in USD constant prices using 2010 as the base year) and the total number of hours worked, taking the normalized value 100 at 2010.

  2. In https://archive.org/details/ProductivityAndUnemploymentForOCDECountries, data and graphs are shown for a more extensive set of countries than those presented in Fig. 1.

  3. A first draft of this paper was published in 2012 (MPRA Paper from University Library of Munich, Germany).

  4. We are interested in finding reduced versions of the Riccetti–Russo–Gallegati model that preserve the oscillating pattern and so allow us to study the relationship between productivity and (un)employment. However, other results produced by the full model (from financial contagion to large crises) could be not reproduced by these simpler versions.

  5. The emergence of damped oscillations may be related to the property of self-organized criticality, typically observed in complex systems that exhibit the “sandpile effect”. In our model, low relative changes in productivity would be absorbed (with no impact) by the economy until they reached a critical value, after which they would then produce a significant influence on the process.

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Acknowledgements

The authors would like to thank “Centro de Computación Científica” at UAM where the simulations were carried out.

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Authors and Affiliations

  1. Departamento de Análisis Económico: Economía Cuantitativa, Universidad Autónoma de Madrid, C/Francisco Tomás y Valiente, 5, 28049, Madrid, Spain

    Carlos M. Fernández-Márquez & Francisco J. Vázquez

  2. Centro de Investigaciones en Economía Teórica y Matemática Aplicada, Universidad Nacional de San Martín, Buenos Aires, Argentina

    Matías Fuentes & Juan José Martínez

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  1. Carlos M. Fernández-Márquez
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  2. Matías Fuentes
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  3. Juan José Martínez
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  4. Francisco J. Vázquez
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Correspondence to Carlos M. Fernández-Márquez.

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Fernández-Márquez, C.M., Fuentes, M., Martínez, J.J. et al. Productivity and unemployment: an ABM approach. J Econ Interact Coord 16, 133–151 (2021). https://doi.org/10.1007/s11403-020-00287-1

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