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A Schumpeterian model of equilibrium unemployment and labor turnover


  • M. Fuat Sener

    () (Department of Economics, Social Sciences Building, Union College, Schenectady, NY 12308, USA)


This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase in the size of innovations or skilled labor saving technological change in R&D activity. In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate. First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate - the creative destruction effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment rate - the resource reallocation effect.

Suggested Citation

  • M. Fuat Sener, 2000. "A Schumpeterian model of equilibrium unemployment and labor turnover," Journal of Evolutionary Economics, Springer, vol. 10(5), pages 557-583.
  • Handle: RePEc:spr:joevec:v:10:y:2000:i:5:p:557-583

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    References listed on IDEAS

    1. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders and Product Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 557-586.
    2. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-347, April.
    3. Saviotti, Pier Paolo & Pyka, Andreas, 2004. "Economic development, qualitative change and employment creation," Structural Change and Economic Dynamics, Elsevier, vol. 15(3), pages 265-287, September.
    4. Fagerberg, Jan & Verspagen, Bart, 1998. "Productivity, R&D Spillovers and Trade," Working Papers 98.2, Eindhoven Center for Innovation Studies.
    5. P.P. Saviotti, 2007. "Qualitative Change and Economic Development," Chapters,in: Elgar Companion to Neo-Schumpeterian Economics, chapter 51 Edward Elgar Publishing.
    6. Malerba, Franco, et al, 1999. "'History-Friendly' Models of Industry Evolution: The Computer Industry," Industrial and Corporate Change, Oxford University Press, vol. 8(1), pages 3-40, March.
    7. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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    Cited by:

    1. Chu, Angus C. & Cozzi, Guido & Furukawa, Yuichi, 2013. "Inflation, Unemployment and Economic Growth in a Schumpeterian Economy," MPRA Paper 50510, University Library of Munich, Germany.

    More about this item


    Frictional unemployment - Wage inequality - Endogenous growth - Job-matching;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General


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