Two of the most dramatic aspects of the current economic crisis are, with no
doubt, the high and persistent rates of unemployment and the accelerated pace at
which inequalities are increasing. According to International Labour Organization
estimates, global unemployment reached 210 million people in 2010. The World
of Work report 2011 (ILO, 2011), under the title «Making markets work for jobs»,
stressed that the current crisis has resulted in a global need of 80 million net new
jobs over the next two years to restore pre-crisis employment rates. There is a vast
literature on the causes and consequences of unemployment. However, little of this
literature specifically provides scarce empirical evidence of the impact of unemployment
on long-run economic growth 1
. Sala-i-Martin et al. (2004) list up to 67
variables potentially influencing long-run growth, but none of them is directly related
to the labour market. In the present paper we examine whether high and persistent
levels of unemployment can be considered a determinant of long-run economic
growth.