Capital scarcities as a reason for high unemployment 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 two, 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 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. Furthermore, 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. Unemployment and minimum living costs are also increased by an increase in population, by an increase in the relative productivity of capital, by an increase in the dispersion of labour quality and by an increase in the importance of capital goods for consumption.
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Find related papers by JEL classification:
- 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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