Quotation Zagler, Martin. 2011. Endogenous Growth, Efficiency Wages, and Persistent Unemployment. Review of Economics and Finance 11 (2): 34-42.


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Abstract

This paper establishes a theoretical relation between the level of unemployment and the economic rate of growth. In a model with a monopolistically competitive manufacturing sector and a competitive innovation sector, which both pay efficiency wages, the equilibrium unemployment rate - the Nawru - exhibits an unambiguously negative impact on the long-run growth performance, as it reduces the innovative capacity of the economy. Only if efficiency levels are different across sectors, a causal relation from the growth rate to the level of unemployment can be established, since less innovation shifts the burden to induce efficiency towards the manufacturing sector, thus fostering unemployment.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Review of Economics and Finance
Language English
Title Endogenous Growth, Efficiency Wages, and Persistent Unemployment
Volume 11
Number 2
Year 2011
Page from 34
Page to 42
Reviewed? Y
URL http://www.bapress.ca/journal-2.html

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People
Zagler, Martin (Details)
Organization
Research Institute for International Taxation FI (Details)
Institute for Macroeconomics IN (Details)
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