'Backyard' technology and regulated wages in a neoclassical OLG growth model
Luciano Fanti () and
Luca Gori ()
Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy
This paper formally explores the joint roles played, on the one side, by the regulation of wages and, on the other side, by the existence of a "backyard" (or home) technology exploited by the unemployed people, in a standard neoclassical OLG growth model. The main findings are the following: 1) the introduction of a "binding" regulated wage fosters the capital accumulation and lead to a higher long term capital stock (and thus to higher output and welfare as well) in comparison with a competitive wage economy, provided that both the labour productivity at "home" and the capital weight in the firms technology are sufficiently high; 2) however, if the regulated wage is set at a too high level, the capital accumulation will be inferior to that of the competitive wage economy. These results, so far escaped closer scrutiny by economic growth literature, shed a new light on the effects of the regulation of wages and may have interesting policy implications.
Keywords: Regulated wage; Unemployment; Home production; OLG model (search for similar items in EconPapers)
JEL-codes: D13 E24 J22 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2008/74
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