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Long-term unemployment, technical progress and capital mobility in an open growth-matching model

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  • Birk, Angela

Abstract

How does technical progress affect long-term unemployment in a small open economy? This relationship is evaluated in an open neoclassical growth model that is extended by a Pissarides-style labor market matching approach. In the general equilibrium model, the labor market of the three factor growth model is characterized by immobile heterogeneous jobless workers. International capital mobility represents the efficient intertemporal allocation of world resources. Depending on a parametric growth condition, an increase in technical progress implies a favorable capitalization effect respectively an unfavorable Schumpeterian creative destruction effect. Secondary effects in form of a stigmatization and a human capital depreciation effect are generated and influence the unemployment duration and the fraction of long-term unemployment negatively. Additionally, the model shows that even in the steady state a constant current account deficit for a net debtor is sustained that rises even more as productivity growth increases.

Suggested Citation

  • Birk, Angela, 2002. "Long-term unemployment, technical progress and capital mobility in an open growth-matching model," HWWA Discussion Papers 171, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26206
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    Keywords

    long-term unemployment; technical progress; capital mobility; growth;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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