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A Schumpeterian model of equilibrium unemployment and labor turnover

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  • M. Fuat Sener

    () (Department of Economics, Social Sciences Building, Union College, Schenectady, NY 12308, USA)

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    Abstract

    This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase in the size of innovations or skilled labor saving technological change in R&D activity. In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate. First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate - the creative destruction effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment rate - the resource reallocation effect.

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Evolutionary Economics.

    Volume (Year): 10 (2000)
    Issue (Month): 5 ()
    Pages: 557-583

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    Handle: RePEc:spr:joevec:v:10:y:2000:i:5:p:557-583

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    Web page: http://link.springer.de/link/service/journals/00191/index.htm

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    Related research

    Keywords: Frictional unemployment - Wage inequality - Endogenous growth - Job-matching;

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