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Integration, Wage Bargaining, and Growth with Creative Destruction


  • Tapio Palokangas


We construct a Schumpeterian growth model of a common market with following properties. Households can stay as workers or become researchers at some cost. Workers are employed in production and researchers in R&D. Workers are unionized. A larger common market means a wider variety of products and more intensive goods market competition. The main findings are as follows. If the common market is able to carry out extensive labour market reforms, then it should accept new members as long as this increases consumption per capita. If no extensive reforms are feasible, then the common market should respond to excessive union power by accepting new members, which increases competition in the product market.

Suggested Citation

  • Tapio Palokangas, 2004. "Integration, Wage Bargaining, and Growth with Creative Destruction," DEGIT Conference Papers c009_015, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c009_015

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    References listed on IDEAS

    1. Palokangas, Tapio, 2003. "The political economy of collective bargaining," Labour Economics, Elsevier, vol. 10(2), pages 253-264, April.
    2. Palokangas, Tapio, 1996. "Endogenous growth and collective bargaining," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 925-944, May.
    3. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    4. Cahuc, Pierre & Michel, Philippe, 1996. "Minimum wage unemployment and growth," European Economic Review, Elsevier, vol. 40(7), pages 1463-1482, August.
    5. Walde, Klaus, 1999. "A Model of Creative Destruction with Undiversifiable Risk and Optimising Households," Economic Journal, Royal Economic Society, vol. 109(454), pages 156-171, March.
    6. Agell, Jonas & Lommerud, Kjell Erik, 1997. "Minimum wages and the incentives for skill formation," Journal of Public Economics, Elsevier, vol. 64(1), pages 25-40, April.
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    More about this item


    integration; wage bargaining; creative destruction;

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General


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