Endogenous Growth, Efficency Wages, and Persistent Unemployment

Martin Zagler ()

Department of Economics Working Papers from Vienna University of Economics and B.A., Department of Economics

Abstract: 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.

Keywords: Endogenous Growth; Product Innovation; Equilibrium Unemployment; Efficiency Wages. (search for similar items in EconPapers)
JEL-codes: O40 (search for similar items in EconPapers)
Date: 1999-09
Note: PDF Document
View list of references View citations in EconPapers

Downloads: (external link)
http://www.wu-wien.ac.at/inst/vw1/papers/wu-wp66.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wiw:wiwwuw:wuwp066

Access Statistics for this paper

More papers in Department of Economics Working Papers from Vienna University of Economics and B.A., Department of Economics
Address: Augasse 2-6, 1090 Vienna, Austria
Series data maintained by Gerlinde Fellner ().