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Labor market rigidity and productivity growth in a model of innovation-driven growth

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  • Parello, Carmelo Pierpaolo

Abstract

Empirical studies investigating the relationship between productivity performance and labor market rigidity have generated a negative result. In this paper we try to provide a theoretical explanation for this empirical result. In doing so, we construct a no-shirking model of innovation-based growth and investigate the steady-state impact of a set of active labor market policies aimed at reducing labor market rigidity and knowledge mismatch generated by innovations. We find that, while enhancing job finding activity definitively improves the equilibrium growth-unemployment mix of the economy, reducing the knowledge mismatch of innovation through active measures is less effective in reducing the equilibrium unemployment and improving growth.

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  • Parello, Carmelo Pierpaolo, 2011. "Labor market rigidity and productivity growth in a model of innovation-driven growth," Economic Modelling, Elsevier, vol. 28(3), pages 1058-1067, May.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1058-1067
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    5. 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.
    6. Primož Dolenc & Suzana Laporšek, 2013. "Flexicurity Policies and their Association with Productivity in the European Union," Prague Economic Papers, Prague University of Economics and Business, vol. 2013(2), pages 224-239.
    7. d'Agostino, Giorgio & Pieroni, Luca & Scarlato, Margherita, 2018. "Evaluating the effects of labour market reforms on job flows: The Italian case," Economic Modelling, Elsevier, vol. 68(C), pages 178-189.

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