Sustainable capitalism: Full-employment flexicurity growth with real wage rigidities

Toichiro Asada, Peter Flaschel, Alfred Greiner and Christian Proaño

Journal of Economic Behavior & Organization, 2011, vol. 77, issue 3, 248-264

Abstract: Abstract In this paper we present a model of flexicurity capitalism that exhibits a second labor market with the government as an employer of first resort, where all workers not employed by firms in the private sector find meaningful employment. We show that the model exhibits a unique interior steady state which is asymptotically stable under real wage adjustment dynamics of the type considered in Blanchard and Katz (1999), and under a type of Okun's Law that links the level of utilization of firms to their hiring and firing decision. The introduction of a company pension fund can be shown to contribute to the viability of the analyzed economic system. However, when credit is incorporated in the model, in place of savings-driven supply side fluctuations in economic activity, investment-driven demand side business cycle fluctuations (of a probably much more volatile type) can take place.

Keywords: Flexicurity; Employer; of; first; resort; Solovian; growth; Company; pension; funds; Sustainability (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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Working Paper: Sustainable Capitalism: Full-Employment Flexicurity Growth with Real Wage Rigidities (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:77:y:2011:i:3:p:248-264

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