IDEAS home Printed from https://ideas.repec.org/a/bap/journl/110203.html
   My bibliography  Save this article

Endogenous Growth, Efficiency Wages, and Persistent Unemployment

Author

Listed:
  • Martin Zagler

    (Department of Economics, WU Vienna, Vienna)

Abstract

This paper establishes a theoretical relation between the level of unemployment and the economic rate of growth. In a model with a monopolistically competitive manufacturing sector and a competitive innovation sector, which both pay efficiency wages, the equilibrium unemployment rate ¨C the Nawru ¨C exhibits an unambiguously negative impact on the long-run growth performance, as it reduces the innovative capacity of the economy. Only if efficiency levels are different across sectors, a causal relation from the growth rate to the level of unemployment can be established, since less innovation shifts the burden to induce efficiency towards the manufacturing sector, thus fostering unemployment.

Suggested Citation

  • Martin Zagler, 2011. "Endogenous Growth, Efficiency Wages, and Persistent Unemployment," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 34-42, April.
    • Handle: RePEc:bap:journl:110203
    as

    Download full text from publisher

    File URL: http://www.bapress.ca/Journal-2/Endogenous%20Growth,%20Efficiency%20Wages,%20and%20Persistent%20Unemployment.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 255-283.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Philippe Aghion & Peter Howitt, 1994. "Growth and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 477-494.
    4. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    5. Wadhwani, Sushil & Wall, Martin, 1990. "The Effects of Profit-Sharing on Employment, Wages, Stock Returns and Productivity: Evidence from UK Micro-data," Economic Journal, Royal Economic Society, vol. 100(399), pages 1-17, March.
    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Anton B. T. M. Van Schaik & Henri L. F. De Groot, 1998. "Unemployment and Endogenous Growth," LABOUR, CEIS, vol. 12(2), pages 189-219, July.
    8. Christopher A. Pissarides, 1987. "Search, Wage Bargains and Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(3), pages 473-483.
    9. Nickell, Stephen & Kong, Paul, 1992. "An investigation into the power of insiders in wage determination," European Economic Review, Elsevier, vol. 36(8), pages 1573-1599, December.
    10. Christopher A. Pissarides, 1985. "Taxes, Subsidies and Equilibrium Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 121-133.
    11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gerlinde Fellner & Matthias Sutter, 2009. "Causes, Consequences, and Cures of Myopic Loss Aversion – An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 119(537), pages 900-916, April.
    2. Hagemann, Harald, 2010. "L. Albert Hahn's Economic Theory of Bank Credit," Department of Economics Working Paper Series 134, WU Vienna University of Economics and Business.
    3. Theresa Grafeneder-Weissteiner & Klaus Prettner, 2009. "Agglomeration and population ageing in a two region model of exogenous growth," VID Working Papers 0901, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
    4. Engelbert Stockhammer & Paul Ramskogler, 2009. "Post-Keynesian economics How to move forward," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(2), pages 227-246.
    5. Theresa Grafeneder-Weissteiner, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Papers wuwp132, Vienna University of Economics and Business, Department of Economics.
    6. Engelbert Stockhammer & Paul Ramskogler, 2008. "Uncertainty and Exploitation in History," Journal of Economic Issues, Taylor & Francis Journals, vol. 42(1), pages 175-194, March.
    7. Badinger, Harald & Kubin, Ingrid, 2007. "Vom kurzfristigen zum mittelfristigen Gleichgewicht in einer offenen Volkswirtschaft unter fixen und flexiblen Wechselkursen," Department of Economics Working Paper Series 101, WU Vienna University of Economics and Business.
    8. Pasquale Commendatore & Ingrid Kubin & Carmelo Petraglia, 2009. "Footloose Capital and Productive Public Services," Chapters, in: Neri Salvadori & Pasquale Commendatore & Massimo Tamberi (ed.), Geography, Structural Change and Economic Development, chapter 1, Edward Elgar Publishing.
    9. Agénor, Pierre-Richard & Lim, King Yoong, 2018. "Unemployment, growth and welfare effects of labor market reforms," Journal of Macroeconomics, Elsevier, vol. 58(C), pages 19-38.
    10. Riedl, Aleksandra & Rocha-Akis, Silvia, 2007. "Testing the tax competition theory: How elastic are national tax bases in western Europe?," Department of Economics Working Paper Series 112, WU Vienna University of Economics and Business.
    11. Leopold Soegner & Alfred Stiassny, 2000. "A Cross-Country Study on Okun's Law," Working Papers geewp13, Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
    12. Steidl, Annemarie & Stockhammer, Engelbert, 2007. "Coming and leaving. Internal mobility in late Imperial Austria," Department of Economics Working Paper Series 107, WU Vienna University of Economics and Business.
    13. Alberto Bucci & Fabio Fiorillo & Stefano Staffolani, 2003. "Can Market Power Influence Employment, Wage Inequality and Growth?," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 129-160, May.
    14. Özlem Onaran, 2007. "International financial markets and fragility in the Eastern Europe: "can it happen" here?," Department of Economics Working Papers wuwp108, Vienna University of Economics and Business, Department of Economics.
    15. Martin Currie & Ingrid Kubin, 2005. "Fixed Price Dynamics versus Flexible Price Dynamics," Department of Economics Working Papers wuwp089, Vienna University of Economics and Business, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alberto Bucci & Fabio Fiorillo & Stefano Staffolani, 2003. "Can Market Power Influence Employment, Wage Inequality and Growth?," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 129-160, May.
    2. Frank Scharr, 2005. "Tarifbindung, Rententeilung und Konzessionsverträge als Einflussgrößen der Lohnhöhe in Unternehmen : eine Untersuchung mit Mikrodaten für thüringische Firmen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 39, July.
    3. Mondal, Debasis & Gupta, Manash Ranjan, 2008. "Intellectual property rights protection and unemployment in a North South model: A theoretical analysis," Economic Modelling, Elsevier, vol. 25(3), pages 463-484, May.
    4. Fabio Aricó, 2003. "Growth and Unemployment: Towards a Theoretical Integration," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 419-455, July.
    5. Juin-jen Chang & Chia-ying Liu & Hsiao-wen Hung, 2013. "Does Performance-Based Compensation Boost Economic Growth or Lead to More Income Inequality?," The Economic Record, The Economic Society of Australia, vol. 89(284), pages 72-82, March.
    6. Tetsugen Haruyama & Campbell Leith, 2010. "Unemployment And The Productivity Slowdown: An Effciency Wage Perspective," The Japanese Economic Review, Japanese Economic Association, vol. 61(3), pages 301-319, September.
    7. Carmeci, Gaetano & Mauro, Luciano, 2003. "Imperfect labor market and convergence: theory and evidence for some OECD countries," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 837-856, November.
    8. Koenig, Felix & Manning, Alan & Petrongolo, Barbara, 2014. "Reservation wages and the wage flexibility puzzle," LSE Research Online Documents on Economics 60613, London School of Economics and Political Science, LSE Library.
    9. Marcello Estevao & Stacey Tevlin, 2000. "Do firms share their success with workers? The response of wages to product market conditions," Finance and Economics Discussion Series 2000-17, Board of Governors of the Federal Reserve System (U.S.).
    10. Dakpogan, Arnaud & Smit, Eon, 2018. "The effect of electricity losses on GDP in Benin," MPRA Paper 89545, University Library of Munich, Germany.
    11. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
    12. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
    13. Jean‐Pierre Danthine & André Kurmann, 2007. "The Macroeconomic Consequences of Reciprocity in Labor Relations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 857-881, December.
    14. Campbell leith & Chol-Won Li, 2001. "Unemployment and the Productivity Slowdown: A Labour Supply Perspective," Working Papers 2001_13, Business School - Economics, University of Glasgow.
    15. Koskela, Erkki & Stenbacka, Rune, 2003. "Equilibrium Unemployment Under Negotiated Profit Sharing," IZA Discussion Papers 840, Institute of Labor Economics (IZA).
    16. Giorgio Fagiolo & Giovanni Dosi & Roberto Gabriele, 2005. "Towards an evolutionary interpretation of aggregate labor market regularities," Springer Books, in: Uwe Cantner & Elias Dinopoulos & Robert F. Lanzillotti (ed.), Entrepreneurships, the New Economy and Public Policy, pages 223-252, Springer.
    17. Kory Kroft & Kavan Kucko & Etienne Lehmann & Johannes Schmieder, 2020. "Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 254-292, February.
    18. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
    19. Bande, Roberto & Fernández, Melchor & Montuenga, Víctor, 2008. "Regional unemployment in Spain: Disparities, business cycle and wage setting," Labour Economics, Elsevier, vol. 15(5), pages 885-914, October.
    20. Ines Perez-Soba Aguilar & Elena Marquez de la Cruz & Ana Rosa Martinez-Canete & Alfonso Palacio-Vera, 2006. "Capital Stock and Unemployment: Searching for the Missing Link," Economics Working Paper Archive wp_475, Levy Economics Institute.

    More about this item

    Keywords

    Endogenous growth; Product innovation; Equilibrium unemployment; Efficiency wages;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bap:journl:110203. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carlson (email available below). General contact details of provider: http://www.bapress.ca .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.