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Unemployment and Growth in the Long Run: An Efficiency-Wage Model with Optimal Savings

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Abstract

This paper develops an efficiency-wage model of steady-state equilibrium with labor-augmenting technical progress, and uses the model to explore the long-run relationship between unemployment and growth. The rate of productivity growth is either specified exogenously or determined endogenously (from learning by doing). In both cases, we preserve key results of the Shapiro-Stiglitz efficiency-wage analysis without growth. Our model, however, also yields some striking new results. For inStance, an exogenous increase in the growth rate may raise the rate of efficiency-wage unemployment, and a once-for-a1l rise in the labor force may reduce the unemployment rate in the endogenous-growth case.

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File URL: http://www1.carleton.ca/economics/research/working-papers/carleton-economic-papers-cep-1991-2000/
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Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 00-01.

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Date of creation: 2000
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Publication status: Published: Revised version in International Economic Review, Vol. 43, No. 3 (August 2002), pp. 875–894
Handle: RePEc:car:carecp:00-01

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Keywords: economic growth; unemployment; efficiency wage.;

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Cited by:
  1. Howard Petith, 2005. "Capitalism, Unemployment and the Transition to the Contemporary Pattern of Growth," UFAE and IAE Working Papers 649.05, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Howard Petith, 2005. "Capitalism, Unemployment and the Transition to the Contemporary Pattern of Growth," Working Papers 194, Barcelona Graduate School of Economics.
  3. Xavier Raurich & Valeri Sorolla, 2012. "Growth, Unemployment and Wage Inertia," DEGIT Conference Papers c017_029, DEGIT, Dynamics, Economic Growth, and International Trade.
  4. Richard Brecher & Zhiqi Chen, 2008. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Carleton Economic Papers 08-07, Carleton University, Department of Economics, revised Nov 2010.
  5. Moreno-Galbis, E., 2006. "Unemployment and endogenous growth with new technologies-skill complementarity," Economic Modelling, Elsevier, vol. 23(2), pages 364-386, March.
  6. Eva, MORENO-GALBIS, 2004. "Unemployment and Endogenous Growth with Capital-Skill Complementarity," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Raurich, Xavier & Sorolla, Valeri, 2014. "Growth, unemployment and wage inertia," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 42-59.
  8. Richard A. Brecher & Zhiqi Chen & Ehsan Choudhri, 2007. "Optimal Taxation in a Dynamic Model of Shirking and Unemployment: Shapiro and Stiglitz Meet Chamley," Carleton Economic Papers 07-07, Carleton University, Department of Economics, revised Aug 2010.
  9. Brecher, Richard A. & Chen, Zhiqi & Choudhri, Ehsan U., 2010. "A dynamic model of shirking and unemployment: Private saving, public debt, and optimal taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1392-1402, August.

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