A Schumpeterian model of equilibrium unemployment and labor turnover |
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Authors: | M Fuat ?ener |
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Institution: | (1) Department of Economics, Social Sciences Building, Union College, Schenectady, NY 12308, USA (e-mail: senerm@union.edu), US |
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Abstract: | This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with
a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled
and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase
in the size of innovations or skilled labor saving technological change in R&D activity.
In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate.
First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate – the creative destruction
effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment
rate – the resource reallocation effect. |
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Keywords: | : Frictional unemployment – Wage inequality – Endogenous growth – Job-matching |
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