Integration, Wage Bargaining, and Growth with Creative Destruction

Tapio Palokangas

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: We construct a Schumpeterian growth model of a common market with following properties. Households can stay as workers or become researchers at some cost. Workers are employed in production and researchers in R&D. Workers are unionized. A larger common market means a wider variety of products and more intensive goods market competition. The main findings are as follows. If the common market is able to carry out extensive labour market reforms, then it should accept new members as long as this increases consumption per capita. If no extensive reforms are feasible, then the common market should respond to excessive union power by accepting new members, which increases competition in the product market.

Keywords: integration; wage bargaining; creative destruction (search for similar items in EconPapers)
JEL-codes: J50 O40 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-06
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