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Schumpeterian growth and the political economy of employment protection

  • Wolf-Heimo Grieben

    ()

This paper analyzes the differing attitudes concerning political support for employment protection between skilled and unskilled workers in a quality-ladder growth model. Creative destruction through innovation results in “Schumpeterian unemployment” of unskilled workers. By voting on firing costs, unskilled workers consider a trade-off between the benefit of fewer unemployment spells and the cost of lower quality growth of consumer goods. Skilled workers, although not threatened by unemployment, may vote for even larger firing costs. Alleviating one labor market rigidity by increasing the matching efficiency between firms and unskilled workers aggravates another rigidity by creating political support for additional firing costs. Copyright Springer-Verlag 2005

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File URL: http://hdl.handle.net/10.1007/BF03051801
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Article provided by Springer in its journal Journal of Economics.

Volume (Year): 10 (2005)
Issue (Month): 1 (December)
Pages: 77-118

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Handle: RePEc:kap:jeczfn:v:10:y:2005:i:1:p:77-118
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=108909

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  1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  2. Dinopoulos, Elias & Segerstrom, Paul, 1996. "A Schumpeterian Model of Protection and Relative Wages," Working Paper Series 471, Research Institute of Industrial Economics.
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