Is There a Growth-Unemployment Trade-Off?
Patrick Toche and
Lyon
No 62, Economics Series Working Papers from University of Oxford, Department of Economics
Abstract:
Why might there be a long-run trade-off between growth and unemployment? In general equilibrium, the returns on the factors of production are interdependent. This paper develops a model where the determination of the wage is central to the evolution of these incentives. The incentive to hire responds little (and in some cases not at all) to changes in the rate of interest. If the wage grows in line with productivity, there is a positive relation between growth and unemployment. If the wage rises as the labour market tightens, the incentive to invest in human and physical capital rises relative to the incentive to hire. There emerges a trade-off between growth and unemployment.
Keywords: endogenous growth; unemployment; human capital (search for similar items in EconPapers)
JEL-codes: E24 J30 O41 (search for similar items in EconPapers)
Date: 2001-01-01
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:wpaper:62
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