Reference : Wage Growth, Productivity Growth, and the Evolution of Employment
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Business & economic sciences : Macroeconomics & monetary economics
Wage Growth, Productivity Growth, and the Evolution of Employment
Hellwig, Martin F. [> >]
Irmen, Andreas mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
C.E.P.R. Discussion Papers
[en] employment; endogenous technical change; perfect competition; productivity growth; wages
[en] This Paper studies the impact of wage growth on the evolution of employment in an intertemporal general-equilibrium model with endogenous productivity growth. For real wage growth above laissez-faire levels, we obtain steady-state equilibria in which productivity grows at the same rate as wages, the real interest rate is below the laissez-faire level, and so is the common growth rate of consumption, demand, and output. In these steady-state equilibria employment contracts at a constant rate equal to the difference between the growth rates of productivity and output. This contrasts with the view that equality of wage growth and productivity growth is a condition for constant employment.
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CEPR Discussion Papers

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