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Frictional unemployment, labor market institutions, and endogenous economic growth

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  • Andreas Irmen

    (University of Heidelberg, CEPR, London, and CESifo, Munich)

Abstract

For a given set of labor market institutions, the rate of frictional unemployment depends on the evolution of the pool of job-seekers. Unemployment rises with the growth rate of labor supply that is proportionate to the rate of population growth. If economic growth is semi-endogenous, the steady-state growth rate depends positively on the rate of population growth. This suggests a trade-off between growth and unemployment: a faster growing economy has a higher unemployment rate. As a consequence, faster growth may not be desirable from a welfare point of view. We make this point in a parsimonious setting where semi-endogenous growth derives from the division of labor and the associated gains from specialization.

Suggested Citation

  • Andreas Irmen, 2009. "Frictional unemployment, labor market institutions, and endogenous economic growth," Economics Bulletin, AccessEcon, vol. 29(2), pages 1127-1138.
  • Handle: RePEc:ebl:ecbull:eb-08o30011
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    References listed on IDEAS

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    Cited by:

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    More about this item

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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