Labour Market Rigidity and Economic Efficiency with Non-General Purpose Technical Change

Gianluca Grimalda

MPRA Paper from University Library of Munich, Germany

Abstract: The contrasting effects of labour market rigidity on efficiency are investigated in a model where technological change is non-general purpose and different types of skills are available to workers. Ex ante efficiency calls for high labour market rigidity, as this favours workers’ acquisition of specific skills which have higher productivity in equilibrium. Ex post efficiency calls for low market rigidity, as this allows more workers to transfer to the innovating sector of the economy. The trade-off between these two mechanisms results in an inverse-U shaped relationship between output and labour market rigidity, which implies that a positive level of labour market rigidity is in general beneficial for the economy.

Keywords: Non-general purpose technology; labour market rigidity; specific and general human capital (search for similar items in EconPapers)
JEL-codes: J24 J31 O30 (search for similar items in EconPapers)
Date: 1971-12-30, Revised 2008-03-12
New Economics Papers: this item is included in nep-eff and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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