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Economic Growth, Labour Market and Demographic Patterns

  • María José Roa García

    ()

    (Centro de Estudios Monetarios Latinoamericanos (cemla))

  • Dulce Saura
  • Francisco J. Vázquez

The purpose of this work is to study the dynamic interaction between income growth, demographic variables patterns and labour market characteristics. We develop a general and simple framework of economic growth with unemployment, endogenous population growth and age structure. Our dynamics results show a potential role for state intervention and institutions in order to enhance growth or smooth out its irregular pattern. Unemployment rate and per capita income dynamics fluctuate along cycles of different periods, and they may even have aperiodic paths. The characteristics of labour market institutions are an endogenous source of instability. In particular, as the rigidity of the labour market increases, the possibility of irregular behavior increases as well. Next, we show how the introduction of endogenous population growth generates a demographic transition that affects the dynamics of unemployment and economic growth rate. Specially, the entrance of the young population to the labour force could smooth fluctuations caused by labour market rigidities. However, this stabilizing factor would disappear by the delayed entrance into the labour market due to the age structure mechanism. The delay, corresponding to the Malthusian cycle, is one source of endogenous oscillations and economic growth. The paper aims to contribute to the literature that studies understand the origin and nature of long run macroeconomic fluctuations in economic growth models.

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File URL: http://cide.edu/repec/economia/pdf/DTE457.pdf
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Paper provided by CIDE, División de Economía in its series Working papers with number DTE 457.

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Length: 22 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:emc:wpaper:dte457
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