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Labor market rigidity and productivity growth in a model of innovation-driven growth

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  • Parello, Carmelo Pierpaolo

Abstract

Empirical studies investigating the relationship between productivity performance and labor market rigidity have generated a negative result. In this paper we try to provide a theoretical explanation for this empirical result. In doing so, we construct a no-shirking model of innovation-based growth and investigate the steady-state impact of a set of active labor market policies aimed at reducing labor market rigidity and knowledge mismatch generated by innovations. We find that, while enhancing job finding activity definitively improves the equilibrium growth-unemployment mix of the economy, reducing the knowledge mismatch of innovation through active measures is less effective in reducing the equilibrium unemployment and improving growth.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 3 (May)
Pages: 1058-1067

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1058-1067

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: R&D investment Productivity growth Knowledge mismatch Labor market policy;

References

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Cited by:
  1. Primož Dolenc & Suzana Laporšek, 2013. "Flexicurity Policies and their Association with Productivity in the European Union," Prague Economic Papers, University of Economics, Prague, vol. 2013(2), pages 224-239.

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