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Unemployment and Endogenous Growth

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  • Anton B. T. M. Van Schaik
  • Henri L. F. De Groot

Abstract

In this paper we develop a two-sector endogenous growth model with a dual labour market, based on efficiency wages. Growth is driven by intentional R&D performed in the high-tech and high-wage sector. How a change in rivalry among firms affects simultaneously growth and unemployment is examined. On the one hand, an increase of the elasticity of substitution between the product varieties of different high-tech firms reduces market power and leads to higher growth but reduces job prospects. On the other hand, if barriers to entry exist, an increase of the number of rivals in the market (due to removal of entry barriers) leads to lower growth, whereas the effect on aggregate employment is ambiguous. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd. 1998.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:labour:v:12:y:1998:i:2:p:189-219
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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