Innovation, Growth, and Labor Market Policy

Dale Mortensen

No 77, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: The purpose of the paper is to study the effects of labor market policies on the equilibrium rate of growth in the Grossman-Helpman model. For that purpose, the version of the their model developed by Klette and Kortum to explain the distribution of firm size is extended to allow for both capital and labor inputs in the production process. The effects of minimum wages, payroll taxes, hiring subsidies, and employment protections are derived. For the sake of comparison, both the case of a competitive labor market and another in which rents are shared as a consequence of search friction are considered. Reference: Klette, T.J., and S. Kortum (2002) \93Innovating Firms and Aggregate Innovation,\94 NBER Working Paper 8819.

Keywords: innovation; growth; search; labor policy (search for similar items in EconPapers)
JEL-codes: E6 J2 O4 (search for similar items in EconPapers)
Date: 2004
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