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On the Effects of Wage Pressure on the Unemployment Rate and Capital Share

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  • Takashi Ohno

Abstract

. The purpose of this paper is to understand the behaviour of the capital share and the unemployment rate in Europe over the past quarter of a century. We consider a model with monopolistic competition, increasing returns and an imperfect labour market, assuming that the elasticity between capital and labour is less than unity. Previous works have generally assumed constant returns to scale. Our results offer an important conclusion, namely that increased wage pressure will increase the unemployment rate and the capital share even though the latter initially decreases, which fits the stylized facts about the studied economies.

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  • Takashi Ohno, 2006. "On the Effects of Wage Pressure on the Unemployment Rate and Capital Share," German Economic Review, Verein für Socialpolitik, vol. 7(4), pages 389-401, November.
    • Handle: RePEc:bla:germec:v:7:y:2006:i:4:p:389-401
    DOI: 10.1111/j.1468-0475.2006.00125.x
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    References listed on IDEAS

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    1. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
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    4. Ulltveit-Moe, Karen Helene & Steen, Frode & Henriksen, Espen, 2001. "Economies of Scale in European Manufacturing Revisited," CEPR Discussion Papers 2896, C.E.P.R. Discussion Papers.
    5. Norbert Berthold & Rainer Fehn & Eric Thode, 2002. "Falling Labor Share and Rising Unemployment: Long–Run Consequences of Institutional Shocks?," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 431-459, November.
    6. Mr. Bob Rowthorn, 1999. "Unemployment, Capital-Labor Substitution, and Economic Growth," IMF Working Papers 1999/043, International Monetary Fund.
    7. Solow,Robert M., 1998. "Monopolistic Competition and Macroeconomic Theory," Cambridge Books, Cambridge University Press, number 9780521626163.
    8. Blanchard, Olivier, 1998. "Revisiting European Unemployment : Unemployment, Capital Accumulation and Factor Prices," Research Series, Economic and Social Research Institute (ESRI), number GLS28.
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    Cited by:

    1. Clemens Christiane, 2009. "Stochastic Growth and Factor Income Risk," German Economic Review, De Gruyter, vol. 10(4), pages 422-447, December.
    2. repec:bla:germec:v:10:y:2009:i::p:422-447 is not listed on IDEAS

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