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Efficiency‐wage Unemployment and Economic Welfare in a Model of Endogenous Growth
Author(s) -
Meckl Jürgen
Publication year - 2001
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/1467-9914.00178
Subject(s) - economics , unemployment , efficiency wage , welfare , wage , labour economics , endogenous growth theory , wage growth , differential (mechanical device) , full employment , growth model , normative , unemployment rate , macroeconomics , economic growth , market economy , philosophy , epistemology , aerospace engineering , engineering , human capital
This paper examines positive and normative implications of efficiency‐wage‐induced unemployment within a model of endogenous growth. Sector‐specific impacts of the wage rate on labour efficiency establish a correlation between the growth rate and the rate of unemployment. The sign of this correlation is determined by the intersectoral wage differential. Despite the existence of unemployment, decisive positive properties of the full‐employment model are preserved. However, welfare implications of the full‐employment model may be reversed. The optimal policy can be to reduce growth, while at the same time raising unemployment.