Capital Scarcities as a Reason for High Employment in the European Union
AbstractThis paper argues that scarcities for non-transferable fixed-supply goods such as land, infrastucture and social capital, may affect European unemployment in three, mutually enforcing, ways. Firstly the existence of minimum non-transferable capital requirements per worker implies that in a growing economy, workers must have ever higher productivities to obtain any wages at all. Secondly, the increased costs of production due to scarcity in production factors will increase the price of output, thereby increasing the minimum costs of living. Thirdly, the fact that non-transferable goods are not only production inputs, but are also indispensable consumer goods, increases the price of the non-tranferable goods even higher, thereby increasing again the minimum wages one needs to survive. Thus in a simple general equilibrium model I show that the presence of high-productivity workers will decrease the wages (and job-opportunities) of other workers and increase the minimum wages necessary to survive.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 96-173/3.
Date of creation: 19 Nov 1996
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Other versions of this item:
- Paul Frijters, 1997. "Capital scarcities as a reason for high unemployment in the European Union," Macroeconomics 9706002, EconWPA.
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
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