Productivity and Unemployment in a Two-country Model with Endogenous Growth
AbstractRelative to the United States, most European countries have high rates of unemployment and low levels of productivity in manufacturing. To relate these issues, we develop a leader-follower model with endogenous growth and dual labour markets, stressing the role of high-tech and high-wage sectors in trade between countries. The model shows a negative relation between unemployment and growth. The steady state relative productivity level and the corresponding rates of unemployment depend on the relative level of fixed costs in the high-tech sectors of both countries. Downsizing of firms in the leader country raises the worldwide rate of unemployment, whereas downsizing of firms in the follower country enlarges the productivity trap.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1997-53.
Date of creation: 1997
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Web page: http://center.uvt.nl
international trade; endogenous growth; unemployment; efficiency wages; managerial fixed costs; relative productivity;
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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