Wage Growth, Productivity Growth, and the Evolution of Employment

Martin Hellwig and Andreas Irmen

No 2927, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper studies the impact of wage growth on the evolution of employment in an intertemporal general-equilibrium model with endogenous productivity growth. For real wage growth above laissez-faire levels, we obtain steady-state equilibria in which productivity grows at the same rate as wages, the real interest rate is below the laissez-faire level, and so is the common growth rate of consumption, demand, and output. In these steady-state equilibria employment contracts at a constant rate equal to the difference between the growth rates of productivity and output. This contrasts with the view that equality of wage growth and productivity growth is a condition for constant employment.

Keywords: Endogenous technical change; Perfect competition; Productivity growth; Wages; Employment (search for similar items in EconPapers)
JEL-codes: D24 D92 E20 E24 J30 O30 O40 (search for similar items in EconPapers)
Date: 2001-08
References: Add references at CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Wage Growth, Productivity Growth, and the Evolution of Employment (1999)
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