The Conundrum of Recovery Policies: Growth or Jobs?

Elias Donopoulos (), Wolf-Heimo Grieben and Fuat Sener ()
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Elias Donopoulos: University of Florida, Department of Economics, Gainesville, USA
Fuat Sener: Department of Economics, Union College, Schenectady, New York, USA

No 2012-03, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: This paper adopts a Neo-Schumpeterian approach to macroeconomics, by proposing a model which includes fully-endogenous growth, involuntary search-based unemployment, and financial frictions. The model analyzes the effects of several recovery policies used by governments to fight unemployment or/and enhance growth. Employment protection legislation reduces growth and unemployment. Policies that reduce the cost of job vacancies decrease unemployment and raise growth. Industrial policies in the form of production subsidies to young small firms, production taxes to adult large firms, and R&D subsidies increase growth and unemployment. Policies that reduce financial frictions accelerate growth but exert an ambiguous effect on unemployment.

Keywords: fully- endogenous growth; Schumpeterian unemployment; financial frictions; recovery policies; vacancy creation (search for similar items in EconPapers)
JEL-codes: J63 O31 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2012-02-13
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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