Frictional unemployment, labor market institutions, and endogenous economic growth

Andreas Irmen

Economics Bulletin, 2009, vol. 29, issue 2, 1127-1138

Abstract: For a given set of labor market institutions, the rate of frictional unemployment depends on the evolution of the pool of job-seekers. Unemployment rises with the growth rate of labor supply that is proportionate to the rate of population growth. If economic growth is semi-endogenous, the steady-state growth rate depends positively on the rate of population growth. This suggests a trade-off between growth and unemployment: a faster growing economy has a higher unemployment rate. As a consequence, faster growth may not be desirable from a welfare point of view. We make this point in a parsimonious setting where semi-endogenous growth derives from the division of labor and the associated gains from specialization.

JEL-codes: J6 O3 (search for similar items in EconPapers)
Date: 2009-05-28
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Citations: View citations in EconPapers (2)

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