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International Labour Market Regulation and Economic Growth with Creative Destruction

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  • Tapio Palokangas

Abstract

A multi-country Schumpeterian growth model is constructed when there is world-wide externality in technological knowledge. Households can enter the labour force as workers or become engineers at some cost. Production employs both workers and engineers while R&D uses only engineers. Workers are unionized and labour market regulation supports union power in wage bargaining. It is shown that international coordination of labour market policy increases the growth rate and the level of welfare. When the interest-rate elasticity of consumption in the world is low (high), the simultaneous regulation (deregulation) of the labour market in all countries increases welfare.

Suggested Citation

  • Tapio Palokangas, 2002. "International Labour Market Regulation and Economic Growth with Creative Destruction," CESifo Working Paper Series 768, CESifo.
    • Handle: RePEc:ces:ceswps:_768
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    References listed on IDEAS

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    1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    2. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-122, February.
    3. Palokangas,Tapio, 2010. "Labour Unions, Public Policy and Economic Growth," Cambridge Books, Cambridge University Press, number 9780521144056.
    4. Palokangas, Tapio, 1996. "Endogenous growth and collective bargaining," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 925-944, May.
    5. Peter Howitt, 2000. "Endogenous Growth and Cross-Country Income Differences," American Economic Review, American Economic Association, vol. 90(4), pages 829-846, September.
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