Endogenous growth, efficiency wages and persistent unemployment

Zagler, Martin ORCID: https://orcid.org/0000-0003-0863-7375 (1999) Endogenous growth, efficiency wages and persistent unemployment. Department of Economics Working Paper Series, 66. Inst. für Volkswirtschaftstheorie und -politik, WU Vienna University of Economics and Business, Vienna.


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This paper establishes theoretical relations between the level of unemployment and the economic growth rate. In a model with a monopolistically competitive manufacturing sector and a competitive innovation sector, which both pay efficiency wages, we find that the unemployment rate exhibits an unambiguously negative impact on the long-run growth performance, as it reduces the innovative capacity of the economy. Only if efficiency levels are different across sectors, we can also establish a causal relation from the growth rate to the rate of unemployment, since less innovation shifts the burden to induce efficiency towards the manufacturing sector, thus fostering unemployment. (author's abstract)

Item Type: Paper
Keywords: endogenous growth / product innovation / equilibrium unemployment / efficiency wages
Classification Codes: JEL O40
Divisions: Departments > Volkswirtschaft
Depositing User: Repository Administrator
Date Deposited: 28 Feb 2002 13:44
Last Modified: 31 Oct 2019 13:08
URI: https://epub.wu.ac.at/id/eprint/1456


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