Sustainable Capitalism: Full-Employment Flexicurity Growth with Real Wage Rigidities
AbstractIn this paper we present a model of flexicurity capitalism that exhibits a second labor market with the government as an employer of first resort, where all workers not employed by firms in the private sector find meaningful employment. We show that the model exhibits a unique interior steady state which is asymptotically stable under real wage adjustment dynamics of the type considered in Blanchard and Katz (1999), and under a type of Okun's Law that links the level of utilization of firms to their hiring and firing decision. The introduction of a company pension fund can be shown to contribute to the viability of the analyzed economic system. However, when credit is incorporated in the model, in place of savings-driven supply side fluctuations in economic activity, investment-driven demand side business cycle fluctuations (of a probably much more volatile type) can take place.
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Bibliographic InfoPaper provided by IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute in its series IMK Working Paper with number 5-2010.
Length: 28 pages
Date of creation: 2010
Date of revision:
Flexicurity; employer of ¯rst resort; Solovian growth; company pension funds; sustainability;
Other versions of this item:
- Asada, Toichiro & Flaschel, Peter & Greiner, Alfred & Proaño, Christian R., 2011. "Sustainable capitalism: Full-employment flexicurity growth with real wage rigidities," Journal of Economic Behavior & Organization, Elsevier, vol. 77(3), pages 248-264, March.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H1 - Public Economics - - Structure and Scope of Government
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-02 (All new papers)
- NEP-LAB-2010-05-02 (Labour Economics)
- NEP-MAC-2010-05-02 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lawrence F. Katz & Olivier Blanchard, 1999.
"Wage Dynamics: Reconciling Theory and Evidence,"
American Economic Review,
American Economic Association, vol. 89(2), pages 69-74, May.
- Torben M. Andersen & Michael Svarer, 2007.
"Flexicurity – labour market performance in Denmark,"
Economics Working Papers
2007-09, School of Economics and Management, University of Aarhus.
- Torben Andersen & Michael Svarer, 2007. "Flexicurity – Labour Market Performance in Denmark," CESifo Working Paper Series 2108, CESifo Group Munich.
- Wilthagen, Ton, 1998. "Flexicurity: A new paradigm for labour market policy reform?," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 98-202, Social Science Research Center Berlin (WZB).
- Flaschel, Peter & Greiner, Alfred, 2009. "Employment cycles and minimum wages. A macro view," Structural Change and Economic Dynamics, Elsevier, vol. 20(4), pages 279-287, December.
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