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Unemployment and Growth in the Long Run: An Efficiency-Wage Model with Optimal Savings

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Listed:
  • Richard A. Breche

    (Carleton University, Canada)

  • Zhiqi Chen

    (Carleton University, Canada)

  • Ehsan U. Choudhri

    (Carleton University, Canada)

Abstract

An efficiency-wage model of steady-state equilibrium with labor-augmenting technical progress is developed to explore the long-run relationship between unemployment and growth. The rate of productivity growth is either specified exogenously or determined endogenously. In both cases, we preserve key results of the Shapiro--Stiglitz efficiency-wage analysis without growth. Our model, however, also yields some striking new results. For instance, an exogenous increase in the growth rate may raise the rate of efficiency-wage unemployment, and a once-for-all rise in the labor force may reduce the unemployment rate in the endogenous-growth case. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Suggested Citation

  • Richard A. Breche & Zhiqi Chen & Ehsan U. Choudhri, 2002. "Unemployment and Growth in the Long Run: An Efficiency-Wage Model with Optimal Savings," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 875-894, August.
  • Handle: RePEc:ier:iecrev:v:43:y:2002:i:3:p:875-894
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    Cited by:

    1. Alan V. Deardorff, 2016. "Local Import Competition in a Lumpy Country," Working Papers 653, Research Seminar in International Economics, University of Michigan.
    2. Moreno-Galbis, E., 2006. "Unemployment and endogenous growth with new technologies-skill complementarity," Economic Modelling, Elsevier, vol. 23(2), pages 364-386, March.
    3. Brecher, Richard A. & Chen, Zhiqi & Choudhri, Ehsan U., 2010. "A dynamic model of shirking and unemployment: Private saving, public debt, and optimal taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1392-1402, August.
    4. Richard A. Brecher & Zhiqi Chen, 2010. "Unemployment of Skilled and Unskilled Labor in an Open Economy: International Trade, Migration, and Outsourcing," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 990-1000, November.
    5. Richard A. Brecher & Till Gross, 2017. "Unemployment and Income-Distribution Effects of Economic Growth: A Minimum-Wage Analysis with Optimal Saving," Carleton Economic Papers 17-08, Carleton University, Department of Economics, revised 14 Jul 2017.
    6. Raurich, Xavier & Sorolla, Valeri, 2014. "Growth, unemployment and wage inertia," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 42-59.
    7. Tetsugen Haruyama & Campbell Leith, 2010. "Unemployment And The Productivity Slowdown: An Effciency Wage Perspective," The Japanese Economic Review, Japanese Economic Association, vol. 61(3), pages 301-319.
    8. Richard A. Brecher & Zhiqi Chen & Ehsan Choudhri, 2007. "Optimal Taxation in a Dynamic Model of Shirking and Unemployment: Shapiro and Stiglitz Meet Chamley," Carleton Economic Papers 07-07, Carleton University, Department of Economics, revised Aug 2010.
    9. Howard Petith, 2005. "Capitalism, Unemployment and the Transition to the Contemporary Pattern of Growth," Working Papers 194, Barcelona Graduate School of Economics.
    10. Howard Petith, 2005. "Capitalism, Unemployment and the Transition to the Contemporary Pattern of Growth," UFAE and IAE Working Papers 649.05, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    11. Eva, MORENO-GALBIS, 2004. "Unemployment and Endogenous Growth with Capital-Skill Complementarity," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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