Labour Market Rigidity and Economic Efficiency with Non-General Purpose Technical Change
The contrasting effects of labour market rigidity on efficiency are investigated in a model where technological change is non-general purpose and different types of skills are available to workers. Ex ante efficiency calls for high labour market rigidity, as this favours workers’ acquisition of specific skills which have higher productivity in equilibrium. Ex post efficiency calls for low market rigidity, as this allows more workers to transfer to the innovating sector of the economy. The trade-off between these two mechanisms results in an inverse-U shaped relationship between output and labour market rigidity, which implies that a positive level of labour market rigidity is in general beneficial for the economy.
|Date of creation:||30 Dec 1971|
|Date of revision:||12 Mar 2008|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
- Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57, November.