Unemployment, Factor Substitution, and Capital Formation

Leo Kaas and Leopold von Thadden ()

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: We incorporate a wage bargaining structure in a dynamic general equilibrium model and show how this feature changes short and long-run properties of equilibria compared with a perfectly competitive setting. We discuss how employment, capital, and income shares respond to wage setting shocks and show that adjustment dynamics depend decisively on the magnitude of the elasticity of substitution between labour and capital. Values of the elasticity below unity add persistence, tend to preserve stability, and lead to empirically plausible adjustment patterns. By contrast, values above unity introduce additional volatility, thereby making steady states potentially unstable.

JEL-codes: D51 E24 E25 (search for similar items in EconPapers)
Date: 2001-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papersecon.univie.ac.at/RePEc/vie/viennp/vie0102.pdf (application/pdf)

Related works:
Journal Article: Unemployment, Factor Substitution and Capital Formation (2003)
Journal Article: Unemployment, Factor Substitution and Capital Formation (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vie:viennp:vie0102

Access Statistics for this paper

More papers in Vienna Economics Papers from University of Vienna, Department of Economics
Bibliographic data for series maintained by Paper Administrator ().