Endogenous Growth, Efficency Wages, and Persistent Unemployment
This paper establishes theoretical relations between the level of unemployment and the economic growth rate. In a model with a monopolistically competitive manufacturing sector and a competitive innovation sector, which both pay efficiency wages, we find that the unemployment rate exhibits an unambiguously negative impact on the long-run growth performance, as it reduces the innovative capacity of the economy. Only if efficiency levels are different across sectors, we can also establish a causal relation from the growth rate to the rate of unemployment, since less innovation shifts the burden to induce efficiency towards the manufacturing sector, thus fostering unemployment.
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| Length: | |
| Date of creation: | Sep 1999 |
| Date of revision: | |
| Handle: | RePEc:wiw:wiwwuw:wuwp066 |
| Note: | PDF Document |
| Contact details of provider: | Postal: Welthandelsplatz 1, 1020 Vienna, Austria Web page: http://www.wu.ac.at/economics/en
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References listed on IDEAS
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- N. Gregory Mankiw & David Romer & David N. Weil, 1990.
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3541, National Bureau of Economic Research, Inc.
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