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Schumpeterian growth and the political economy of employment protection

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  • Wolf-Heimo Grieben

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Abstract

This paper analyzes the differing attitudes concerning political support for employment protection between skilled and unskilled workers in a quality-ladder growth model. Creative destruction through innovation results in “Schumpeterian unemployment” of unskilled workers. By voting on firing costs, unskilled workers consider a trade-off between the benefit of fewer unemployment spells and the cost of lower quality growth of consumer goods. Skilled workers, although not threatened by unemployment, may vote for even larger firing costs. Alleviating one labor market rigidity by increasing the matching efficiency between firms and unskilled workers aggravates another rigidity by creating political support for additional firing costs. Copyright Springer-Verlag 2005

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Bibliographic Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 86 (2005)
Issue (Month): 1 (December)
Pages: 77-118

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Handle: RePEc:kap:jeczfn:v:86:y:2005:i:1:p:77-118

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Web page: http://www.springerlink.com/link.asp?id=108909

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Keywords: Non-Scale Growth; Schumpeterian Unemployment; Firing Costs; J63; O33; E24; D72;

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Cited by:
  1. Wolf-Heimo Grieben, 2006. "Globalization with labor market frictions and non-scale growth," Working Papers of the Research Group Heterogenous Labor 06-09, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.

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