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The Conundrum of Recovery Policies: Growth or Jobs?

Author

Listed:
  • Elias Dinopoulos

    () (University of Florida, Department of Economics, Gainesville, USA)

  • Wolf-Heimo Grieben

    () (Department of Economics, University of Konstanz, Germany)

  • Fuat Sener

    () (Department of Economics, Union College, Schenectady, New York, USA)

Abstract

This paper adopts a Neo-Schumpeterian approach to macroeconomics, by proposing a model which includes fully-endogenous growth, involuntary search-based unemployment, and financial frictions. The model analyzes the effects of several recovery policies used by governments to fight unemployment or/and enhance growth. Employment protection legislation reduces growth and unemployment. Policies that reduce the cost of job vacancies decrease unemployment and raise growth. Industrial policies in the form of production subsidies to young small firms, production taxes to adult large firms, and R&D subsidies increase growth and unemployment. Policies that reduce financial frictions accelerate growth but exert an ambiguous effect on unemployment.

Suggested Citation

  • Elias Dinopoulos & Wolf-Heimo Grieben & Fuat Sener, 2012. "The Conundrum of Recovery Policies: Growth or Jobs?," Working Paper Series of the Department of Economics, University of Konstanz 2012-03, Department of Economics, University of Konstanz.
  • Handle: RePEc:knz:dpteco:1203
    as

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    File URL: http://www.uni-konstanz.de/FuF/wiwi/workingpaperseries/WP_Grieben_3-12.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    fully- endogenous growth; Schumpeterian unemployment; financial frictions; recovery policies; vacancy creation;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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