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Efficiency-wage unemployment and endogenous growth

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  • Meckl, Jürgen

Abstract

This paper examines positive and normative implications of efficiency-wage induced unemployment within a model of endogenous growth. Sectorspecific impacts of the wage rate on labor efficiency establish a correlation between the growth rate and the rate of unemployment. The sign of this correlation is shown to be given by the intersectoral wage differential. Despite the existence of unemployment, decisive positive properties of the full-employment model are preserved. However, welfare implications of the full-employment model may be reversed. The optimal policy can be to reduce growth, while at the same time raising unemployment.

Suggested Citation

  • Meckl, Jürgen, 1999. "Efficiency-wage unemployment and endogenous growth," Discussion Papers, Series I 295, University of Konstanz, Department of Economics.
    • Handle: RePEc:zbw:kondp1:295
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    References listed on IDEAS

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    More about this item

    Keywords

    innovation-based growth; unemployment; efficiency wages;
    All these keywords.

    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
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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