[en] For a given set of labor market institutions, the rate of frictional unemployment depends on the evolution of the pool of job-seekers. Unemployment rises with the growth rate of labor supply that is proportionate to the rate of population growth. If economic growth is semi-endogenous, the steady-state growth rate depends positively on the rate of population growth. This suggests a trade-off between growth and unemployment: a faster growing economy has a higher unemployment rate. As a consequence, faster growth may not be desirable from a welfare point of view. We make this point in a parsimonious setting where semi-endogenous growth derives from the division of labor and the associated gains from specialization.
Disciplines :
Macroeconomics & monetary economics
Author, co-author :
IRMEN, Andreas ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Language :
English
Title :
Frictional unemployment, labor market institutions, and endogenous economic growth