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A General Framework for Growth Models with Non-Competitive Labor and Product Markets and Disequilibrium Unemployment

  • Xavier Raurich
  • Valeri Sorolla

In this paper we derive the general framework for growth models with non competitive labor and output markets and disequilibrium unemployment. For the three standard ways of generating savings, the framework makes clear how capital growth depends on employment and employment on the stock of capital and how both variables depend on the real wage and the markup. Then we analyze the long run relationship between growth and unemployment for some standard wage setting rules: constant real wages, rules that imply a constant unemployment rate and rules with inertia on wages and labor incomes, paying special attention to the neoclassical production function with in…finite horizon consumers, the Ramsey model (the canonical model of growth) with unemployment.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 369.

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Date of creation: Dec 2008
Handle: RePEc:bge:wpaper:369
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  1. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, March.
  2. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
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  4. de la Croix, David & Palm, Franz & Urbain, Jean-Pierre, 1996. "Labor market dynamics when effort depends on wage growth comparisons," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1996019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Sep 1996.
  5. Galí, Jordi, 1993. "Multiple Equilibria in a Growth Model with Monopolistic Competition," CEPR Discussion Papers 751, C.E.P.R. Discussion Papers.
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  7. Simon Anderson & Michael Devereux, 1985. "Trade Unions and the Choice of Capital Stock," Working Papers 600, Queen's University, Department of Economics.
  8. Francesco Daveri & Marco Maffezzoli, "undated". "A numerical approach to fiscal policy, unemployment and growth in Europe," Working Papers 155, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Marco Maffezzoli, 2001. "Non-Walrasian Labor Markets and Real Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(4), pages 860-892, October.
  10. Raurich, Xavier & Sala, Hector & Sorolla, Valeri, 2004. "Unemployment, Growth and Fiscal Policy: New Insights on the Hysteresis Hypothesis," IZA Discussion Papers 1127, Institute for the Study of Labor (IZA).
  11. Collard, Fabrice & de la Croix, David, 1996. "Gift exchange and the business cycle: the fair wage strikes back," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Apr 1997.
  12. Joao Gomes & Jeremy Greenwood & Sergio T. Rebelo, 2001. "Equilibrium Unemployment," RCER Working Papers 479, University of Rochester - Center for Economic Research (RCER).
  13. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  14. Kaas, Leo & von Thadden, Leopold, 2001. "Unemployment, Factor Substitution, and Capital Formation," Discussion Paper Series 1: Economic Studies 2001,01, Deutsche Bundesbank, Research Centre.
  15. C Bean & Christopher A. Pissarides, 1992. "Unemployment, Consumption and Growth," CEP Discussion Papers dp0100, Centre for Economic Performance, LSE.
  16. Doménech, Rafael & Garcí­a, José Ramón, 2008. "Unemployment, taxation and public expenditure in OECD economies," European Journal of Political Economy, Elsevier, vol. 24(1), pages 202-217, March.
  17. Benassy, Jean-Pascal, 1997. " Imperfect Competition, Capital Shortages and Unemployment Persistence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 15-27, March.
  18. Hogan, Vincent, 2004. "Wage aspirations and unemployment persistence," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1623-1643, November.
  19. Valeri Sorolla-i-Amat, . "Growth, Unemployment And The Wage Setting Process," UFAE and IAE Working Papers 458.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  20. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
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