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Efficiency-wage unemployment and endogenous growth

  • Meckl, Jürgen

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.

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Paper provided by University of Konstanz, Department of Economics in its series Discussion Papers, Series I with number 295.

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Date of creation: 1999
Date of revision:
Handle: RePEc:zbw:kondp1:295
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  1. Bénassy, Jean-Pascal, 1996. "Is there always too little research in endogenous growth with expanding product variety ?," CEPREMAP Working Papers (Couverture Orange) 9615, CEPREMAP.
  2. Oswald, A.J., 1997. "Happiness and Economic Performance," Papers 18, Centre for Economic Performance & Institute of Economics.
  3. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  4. Aghion, Philippe & Howitt, Peter, 1994. "Growth and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 477-94, July.
  5. van Schaik, A.B.T.M. & de Groot, H.L.F., 1995. "Unemployment and endogenous growth," Discussion Paper 1995-75, Tilburg University, Center for Economic Research.
  6. Lawrence H. Summers, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," NBER Working Papers 2590, National Bureau of Economic Research, Inc.
  7. C Bean & Christopher A. Pissarides, 1992. "Unemployment, Consumption and Growth," CEP Discussion Papers dp0100, Centre for Economic Performance, LSE.
  8. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  9. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  10. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  11. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
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