Resource title

Endogenous growth, efficiency wages and persistent unemployment

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Resource description

This paper establishes theoretical relations between the level of unemployment and the economic growth rate. In a model with a monopolistically competitive manufacturing sector and a competitive innovation sector, which both pay efficiency wages, we find that the unemployment rate 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, we can also establish a causal relation from the growth rate to the rate of unemployment, since less innovation shifts the burden to induce efficiency towards the manufacturing sector, thus fostering unemployment. (author's abstract) ; Series: Department of Economics Working Paper Series

Resource author

Martin Zagler

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Resource language

en

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application/pdf

Resource resource URL

http://epub.wu.ac.at/1456/1/document.pdf

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