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Alfred Marshall Lecture: Growth, Unemployment, and Labor Market Policy

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  • Dale T. Mortensen

    (Northwestern University,)

Abstract

The role of passive labor market policy as a possible reason for the run up in relative unemployment rates in Europe in the 1980s has been extensively studied. More recently the focus have shifted to lagging growth rates in Europe. The Lisbon strategy reflects these concerns by calling for reforms that ease market access, promote flexible labor markets, and simplify taxes and market regulation. The principal purpose of this paper is to build a simple model in which the possible effects of payroll taxes and employment protection policies on both unemployment and growth can be studied. The model is constructed of "off the shelf" parts found in the literatures on equilibrium unemployment and endogenous growth of the Schumpeterian variety. The model identifies channels though which both taxes and employment protection mandates can adversely affect growth though innovation. (JEL: E24, O40, J64, O31) Copyright (c) 2005 The European Economic Association.

Suggested Citation

  • Dale T. Mortensen, 2005. "Alfred Marshall Lecture: Growth, Unemployment, and Labor Market Policy," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 236-258, 04/05.
    • Handle: RePEc:tpr:jeurec:v:3:y:2005:i:2-3:p:236-258
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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