Unemployment, consumption and growth
In this paper we highlight certain links between unemployment, savings and growth. Using a standard overlapping generations framework modified to incorporate matching frictions in the labour market and a technology capable of yielding unbounded endogenous growth, we show that the cross-country bivariate correlation between unemployment and growth can be either positive or negative depending on the source of the differences in economic structures across countries. Amongst other results we note an 'anti-Kaldorian' property whereby an increase in the relative bargaining strength of workers which tends to reduce employment (and hence also the volume of savings), may nevertheless increase growth because the associated redistribution towards those who save (the young) produces an increase in the total volume of saving overall. We also present a two-sector variant of the model in which there is imperfect (Cournot) competition in consumption goods markets. A reduction in the propensity to save leads to an expansion in the market size for consumption goods, an increase in competition as new firms enter, and a fall in the relative price of consumption goods. This tends to expand employment. If entry costs into consumption goods production are sufficiently large this expansion in employment can be big enough to produce an increase in the total volume of saving even though the propensity to save has itself decreased. This 'Keynesian' result is in marked contrast to more 'Classical' results that are obtained when the same experiment is conducted in our earlier model.
(This abstract was borrowed from another version of this item.)
When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:37:y:1993:i:4:p:837-854. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.