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




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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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


Zagler, Martin (Details)
Research Institute for International Taxation FI (Details)
Department of Economics (Crespo Cuaresma) (Details)
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