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Integration, Wage Bargaining, and Growth with Creative Destruction

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  • Tapio Palokangas

Abstract

We construct a Schumpeterian growth model of a common market with following properties. Households can stay as workers or become researchers at some cost. Workers are employed in production and researchers in R&D. Workers are unionized. A larger common market means a wider variety of products and more intensive goods market competition. The main findings are as follows. If the common market is able to carry out extensive labour market reforms, then it should accept new members as long as this increases consumption per capita. If no extensive reforms are feasible, then the common market should respond to excessive union power by accepting new members, which increases competition in the product market.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_015.

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Length: 21 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:deg:conpap:c009_015

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Keywords: integration; wage bargaining; creative destruction;

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  1. Tapio Palokangas, 2002. "The Political Economy of Collective Bargaining," CESifo Working Paper Series 719, CESifo Group Munich.
  2. Walde, Klaus, 1999. "A Model of Creative Destruction with Undiversifiable Risk and Optimising Households," Economic Journal, Royal Economic Society, vol. 109(454), pages C156-71, March.
  3. Cahuc, P. & Michel, P., 1992. "Minimum Wage, Unemployment and Growth," Papiers d'Economie Mathématique et Applications 92.35, Université Panthéon-Sorbonne (Paris 1).
  4. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  5. Palokangas, Tapio, 1996. "Endogenous growth and collective bargaining," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 925-944, May.
  6. Agell, Jonas & Lommerud, Kjell Erik, 1997. "Minimum wages and the incentives for skill formation," Journal of Public Economics, Elsevier, vol. 64(1), pages 25-40, April.
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