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A General Framework for Growth Models with Non-Competitive Labor and Product Markets and Disequilibrium Unemployment

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  • Xavier Raurich
  • Valeri Sorolla

Abstract

In this paper we derive the general framework for growth models with non competitive labor and output markets and disequilibrium unemployment. For the three standard ways of generating savings, the framework makes clear how capital growth depends on employment and employment on the stock of capital and how both variables depend on the real wage and the markup. Then we analyze the long run relationship between growth and unemployment for some standard wage setting rules: constant real wages, rules that imply a constant unemployment rate and rules with inertia on wages and labor incomes, paying special attention to the neoclassical production function with in…finite horizon consumers, the Ramsey model (the canonical model of growth) with unemployment.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 369.

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Date of creation: Dec 2008
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Handle: RePEc:bge:wpaper:369

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Keywords: Disequilibrium Unemployment; Growth; Wage Setting;

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  1. Samuel Bentolila & Gilles Saint Paul, 1999. "Explaining movements in the labor share," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 374, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Raurich, Xavier & Sala, Hector & Sorolla, Valeri, 2006. "Unemployment, Growth, And Fiscal Policy: New Insights On The Hysteresis Hypothesis," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 10(03), pages 285-316, June.
  3. Marco Maffezzoli, 2000. "Non-Walrasian Labor Markets and Real Business Cycles," Macroeconomics, EconWPA 0004009, EconWPA.
  4. Kaas, Leo & von Thadden, Leopold, 2001. "Unemployment, Factor Substitution, and Capital Formation," Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank, Research Centre 2001,01, Deutsche Bundesbank, Research Centre.
  5. Gali, Jordi, 1996. "Multiple Equilibria in a Growth Model with Monopolistic Competition," Economic Theory, Springer, Springer, vol. 8(2), pages 251-66, August.
  6. Francesco Daveri & Marco Maffezzoli, 2000. "A numerical approach to fiscal policy, unemployment, and growth in Europe," Macroeconomics, EconWPA 0004010, EconWPA.
  7. Joao Gomes & Jeremy Greenwood & Sergio Rebelo, 1997. "Equilibrium Unemployment," NBER Working Papers 5922, National Bureau of Economic Research, Inc.
  8. Benassy, Jean-Pascal, 1997. " Imperfect Competition, Capital Shortages and Unemployment Persistence," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 99(1), pages 15-27, March.
  9. Jean-Pierre Danthine & André Kurmann, 2003. "Fair Wages in a New Keynesian Model of the Business Cycle," Cahiers de recherche, CIRPEE 0320, CIRPEE.
  10. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, The MIT Press, edition 2, volume 1, number 0262025531, December.
  11. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  12. Croix,David,de la & Palm,Franz & Urbain,Jean-Pierre, 1996. "Labor market dynamics when effort depends on wage growth comparisons," Research Memorandum, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) 016, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  13. Xavier Raurich & Valeri Sorolla, . "Unemployment and Wage Formation in a Growth Model with Public Capital," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 508.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  14. Anderson, Simon P & Devereux, Michael, 1988. " Trade Unions and the Choice of Capital Stock," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 90(1), pages 27-44.
  15. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, Elsevier, vol. 1(1), pages 79-82.
  16. Vincent Hogan, 2003. "Wage Aspirations and Unemployment Persistence," Working Papers, School Of Economics, University College Dublin 200310, School Of Economics, University College Dublin.
  17. Valeri Sorolla-i-Amat, . "Growth, Unemployment And The Wage Setting Process," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 458.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  18. Doménech, Rafael & Garcí­a, José Ramón, 2008. "Unemployment, taxation and public expenditure in OECD economies," European Journal of Political Economy, Elsevier, Elsevier, vol. 24(1), pages 202-217, March.
  19. Fabrice Collard & David de la Croix, 2000. "Gift Exchange and the Business Cycle: The Fair Wage Strikes Back," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 166-193, January.
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