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Can Underemployment Persist in an Expanding Economy? Clues from a Non-Walrasian OLG Model with Endogenous Longevity

Author

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  • Grégory Ponthière

    (CREPP - Center of Research in Public Economics and Population Economics - Université de Liège, FNRS - Fonds de la Recherche Scientifique - Fonds de la Recherche Scientifique [FNRS])

Abstract

This paper aims at casting a new light on the persistence of underemployment in emerging economies, by examining the relationship between labour market imperfections and longevity changes. For that purpose, we develop a two-period OLG model where longevity depends positively on the real wage, but negatively on the underemployment level, which both result from wage negotiations between a trade-union, representing workers (i.e. young generation), and the management, representing capital-holders (i.e. old generation). The existence, uniqueness and stability of a non-trivial steady-state equilibrium are studied. The distribution of bargaining power is shown to be a major determinant of the short run and long run dynamics of employment, production and longevity. The dynamics is also shown to be significantly sensitive to the precise form under which job quality affects longevity.

Suggested Citation

  • Grégory Ponthière, 2008. "Can Underemployment Persist in an Expanding Economy? Clues from a Non-Walrasian OLG Model with Endogenous Longevity," Post-Print halshs-00754278, HAL.
  • Handle: RePEc:hal:journl:halshs-00754278
    DOI: 10.1007/s10644-008-9043-7
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754278
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    References listed on IDEAS

    as
    1. Bowden, S. & Higgins, D.M. & Price, C., 2006. "A very peculiar practice: Underemployment in Britain during the interwar years," European Review of Economic History, Cambridge University Press, vol. 10(01), pages 89-108, April.
    2. Arnsperger, Christian & de la Croix, David, 1993. "Bargaining and equilibrium unemployment : Narrowing the gap between New Keynesian and 'disequilibrium' theories," European Journal of Political Economy, Elsevier, vol. 9(2), pages 163-190, May.
    3. Gerdtham, Ulf-G. & Johannesson, Magnus, 2003. "A note on the effect of unemployment on mortality," Journal of Health Economics, Elsevier, vol. 22(3), pages 505-518, May.
    4. Pierre Pestieau & Gregory Ponthiere & Motohiro Sato, 2008. "Longevity, Health Spending, and Pay-as-you-Go Pensions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(1), pages 1-18, March.
    5. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
    6. Devereux, Michael B. & Lockwood, Ben, 1991. "Trade unions, non-binding wage agreements, and capital accumulation," European Economic Review, Elsevier, vol. 35(7), pages 1411-1426, October.
    7. Bhattacharya, Joydeep & Qiao, Xue, 2005. "Public and Private Expenditures on Health in a Growth Model," Staff General Research Papers Archive 12378, Iowa State University, Department of Economics.
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    Cited by:

    1. Gregory Ponthiere, 2009. "Rectangularization And The Rise In Limit‐Longevity In A Simple Overlapping Generations Model," Manchester School, University of Manchester, vol. 77(1), pages 17-46, January.

    More about this item

    Keywords

    OLG model : Underemployment : Longevity; Bargaining power; Wage bargaining;

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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