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Endogenous, Efficient Long‐Run Cyclical Unemployment, Endogenous Long‐Run Growth, and Division of Labor
Author(s) -
Du Julan
Publication year - 2003
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00190
Subject(s) - economics , unemployment , endogenous growth theory , business cycle , division of labour , overlapping generations model , full employment , general equilibrium theory , labour economics , imperfect , pareto principle , growth model , macroeconomics , microeconomics , human capital , market economy , linguistics , philosophy , operations management
The paper uses a dynamic equilibrium model to explain the concurrence of economic growth and business cycles. Introducing durable goods into a model with ex‐ante identical consumer–producers and economies of specialized learning‐by‐doing, the author shows that when job‐shifting costs, economies of specialized learning‐by‐doing, and trading efficiency are sufficiently large, a dynamic equilibrium with business cycles and unemployment might be Pareto superior to noncyclical growth patterns. Long‐run cyclical unemployment still exists when the credit market is imperfect. Extending the model into overlapping generations framework, the author shows that complete division of labor with business cycles would still occur in equilibrium.