On the Effects of Wage Pressure on the Unemployment Rate and Capital Share

Takashi Ohno

German Economic Review, 2006, vol. 7, issue 4, 389-401

Abstract: Abstract. The purpose of this paper is to understand the behaviour of the capital share and the unemployment rate in Europe over the past quarter of a century. We consider a model with monopolistic competition, increasing returns and an imperfect labour market, assuming that the elasticity between capital and labour is less than unity. Previous works have generally assumed constant returns to scale. Our results offer an important conclusion, namely that increased wage pressure will increase the unemployment rate and the capital share even though the latter initially decreases, which fits the stylized facts about the studied economies.

Date: 2006
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https://doi.org/10.1111/j.1468-0475.2006.00125.x

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German Economic Review is currently edited by Bernhard Felderer, Joseph F. Francois, Ivo Welch, Urs Schweizer and David E. Wildasin

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