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The Long Run Effect of Growth on Employment in a Labor Market with Matching Frictions: The Role of Labor Market Institutions

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  • Valeri Sorolla

Abstract

In this paper we analyze the long run effect of exogenous technological growth on the employment rate in a labor market with matching frictions when there is either individual or collective wage setting and different timing for setting wages, labor and capital. We obtain that the effect depends on the timing of setting wages with respect to capital and labor and on the way the unemployment benefit is financed. The type of wage negotiation (individual or collective) does not change really much the effect. The result that appears in most cases is that growth has a negative effect on the long run rate of employment meaning that, in general, growth is bad for employment.

Suggested Citation

  • Valeri Sorolla, 2014. "The Long Run Effect of Growth on Employment in a Labor Market with Matching Frictions: The Role of Labor Market Institutions," UFAE and IAE Working Papers 949.14, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 02 Feb 2015.
    • Handle: RePEc:aub:autbar:949.14
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    References listed on IDEAS

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    1. Pierre Cahuc & Francois Marque & Etienne Wasmer, 2008. "A Theory Of Wages And Labor Demand With Intra-Firm Bargaining And Matching Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 943-972, August.
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    5. Raurich, Xavier & Sorolla, Valeri, 2014. "Growth, unemployment and wage inertia," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 42-59.
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    Keywords

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    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
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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