Determinants of Long-Run Unemployment
AbstractThis paper investigates the determinants of long-run unemployment and growth by extending the endogenous growth model of Howitt and Aghion (1998) to allow for a more general treatment of the labor market in the spirit of Pissarides (1990). We find that (i) both long-run growth and unemployment depend not only on factors that affect long-run growth as identified in endogenous growth models with full employment, but also on certain labor market parameters; (ii) long-run unemployment may rise or fall with growth depending on the model's parameters; and (iii) though government policies that promote growth indirectly through improvement in labor market efficiency always reduce the long-run unemployment rate, policies that directly encourage investment in research and development may increase the unemployment rate.
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Bibliographic InfoArticle provided by Southern Economic Association in its journal Southern Economic Journal.
Volume (Year): 74 (2008)
Issue (Month): 3 (January)
Find related papers by JEL classification:
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General
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