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How do Labor Market Institutions affect the Link between Growth and Unemployment: the case of the European countries

Author

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  • Stéphane Adjemian
  • François Langot
  • Coralia Quintero-Rojas

Abstract

This paper analyzes how the frictions in the labor market simultaneously affect the economic growth and the long run unemployment. To this goal, we develop a schumpeterian model of endogenous growth: agents have the choice between employment and R and D activities. Unemployment is caused by the wage-setting behavior of unions. We show that: (i) Increases in the labor costs or in the power of trade unions lead to higher unemployment and lower economic growth. (ii) Efficient bargain allows to increase employment, at the price of a lower growth rate. These theoretical predictions are consistent with the insights from our empirical analysis based on 183 European Regions, between 1980-2003

Suggested Citation

  • Stéphane Adjemian & François Langot & Coralia Quintero-Rojas, 2010. "How do Labor Market Institutions affect the Link between Growth and Unemployment: the case of the European countries," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 7(2), pages 347-371, December.
  • Handle: RePEc:liu:liucej:v:7:y:2010:i:2:p:347-371
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    File URL: http://eaces.liuc.it/18242979201002/182429792010070206.pdf
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    References listed on IDEAS

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    1. Arnaud Chéron & Francois Langot & Eva Moreno‐Galbis, 2011. "Labour Market Institutions and Technological Employment," Economica, London School of Economics and Political Science, vol. 78(309), pages 159-186, January.
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    Cited by:

    1. repec:ibn:ijefaa:v:9:y:2017:i:4:p:95-104 is not listed on IDEAS
    2. KARGI, Bilal, 2014. "Okun’s Law and Long Term Co-Integration Analysis for OECD Countries (1987-2012)," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 77-85.
    3. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2015. "Union, efficiency of labour and endogenous growth," MPRA Paper 64911, University Library of Munich, Germany.
    4. Chandril Bhattacharyya & Manash Ranjan Gupta, 2015. "Unionized Labour Market, Unemployment Allowances, Productive Public Expenditure And Endogenous Growth," Metroeconomica, Wiley Blackwell, vol. 66(3), pages 397-425, July.
    5. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2014. "Unionised labour market, efficiency wage and endogenous growth," MPRA Paper 58332, University Library of Munich, Germany.

    More about this item

    Keywords

    endogenous growth; unemployment; labor market institutions;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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