Relative convergence in a dual economy with tradeable and non-tradeable goods
AbstractThis paper develops a two-country two-sector endogenous growth model with a dual labour market based on efficiency wages. Growth is driven by Research done in the (high-tech) tradeable sector. The follower country tends to grow faster the greater the productivity gap from the leader country, but differences in unemployment benefit systems can lead to relative convergence, i.e. a steady state with the backward country lagging behind the leader country. The reason for this is that high social welfare benefits generate high unemployment and reduce the amount of labour employed for R&D purposes. Furthermore, it is shown that a shift in preferences towards non-tradeables can explain a global slowdown in economic growth.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1995-43.
Date of creation: 1995
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Web page: http://center.uvt.nl
Economic Growth; Wages; Unemployment; Growth Models; economic development;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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