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Unemployment and Productivity Growth: An Empirical Analysis within the Augmented Solow Model

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Listed:
  • Michael Bräuninger
  • Markus Pannenberg

Abstract

Does a country's level of unemployment have an impact on the long-run growth rate? Incorporating unemployment into a generalised Solow-type growth model, yields some answers. In the traditional Solow model, unemployment has no long-run influence on the growth rate and the level of productivity. The long-run level of productivity is reduced if higher unemployment leads to less formal education or to less learning-by-doing. If we allow for endogenous growth, unemployment reduces long-run productivity growth. Using panel data from 13 OECD countries from 1960 to 1990, we find evidence that an increase in unemployment scales down the long-run level of productivity.

Suggested Citation

  • Michael Bräuninger & Markus Pannenberg, 2000. "Unemployment and Productivity Growth: An Empirical Analysis within the Augmented Solow Model," Discussion Papers of DIW Berlin 230, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp230
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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