Abstract
This article assesses the effectiveness of the labour market reforms implemented in Portugal as part of the Troika’s structural reform package. Using an ARDL-bounds test model to perform the econometric estimation, this investigation examines the long-run relationship between unemployment, capital accumulation and labour market variables for the 1985–2013 period. The econometric estimation suggests that capital accumulation has been the main driver of long-run unemployment, whilst labour market variables have played a minor explanatory role. These results suggest that Portuguese NAIRU is endogenous to capital accumulation and do not support the Troika’s emphasis on labor market reforms as a strategy to reduce long-term unemployment.
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