Schumpeterian growth and the political economy of employment protection

Wolf-Heimo Grieben

Journal of Economics, 2005, vol. 86, issue 1, 77-118

Abstract: This paper analyzes the differing attitudes concerning political support for employment protection between skilled and unskilled workers in a quality-ladder growth model. Creative destruction through innovation results in “Schumpeterian unemployment” of unskilled workers. By voting on firing costs, unskilled workers consider a trade-off between the benefit of fewer unemployment spells and the cost of lower quality growth of consumer goods. Skilled workers, although not threatened by unemployment, may vote for even larger firing costs. Alleviating one labor market rigidity by increasing the matching efficiency between firms and unskilled workers aggravates another rigidity by creating political support for additional firing costs. Copyright Springer-Verlag 2005

Keywords: Non-Scale Growth; Schumpeterian Unemployment; Firing Costs; J63; O33; E24; D72 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:86:y:2005:i:1:p:77-118

DOI: 10.1007/BF03051801

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