The CBO estimated that the natural rate of
unemployment
was 6.2% in 1979 and 5.0% in
2001. If you examine Figure 8.10 on page 279
carefully, you can see that the natural rate
remained
relatively constant during the 1980s
and then fell more rapidly during the 1990s.
a. Considering only the frictional component of
the natural rate of unemployment, what might
explain this change?
b. Productivity growth was slow during the
1980s. One theory about this slow growth
was that innovations in computer technology
were not increasing productivity in ways that
were directly measurable. Productivity growth
increased in the 1990s, and at the same time,
the natural rate fell. Does this fact suggest
anything about structural unemployment in
the 1980s and 1990s?