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Andreas Irmen
''Frictional unemployment, labor market institutions, and endogenous economic growth''
( 2009, Vol. 29 No.2 )
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.
JEL: O3 - Technological Change; Research and Development: General
J6 - Mobility, Unemployment, and Vacancies: General
Manuscript Received : Nov 17 2008 Manuscript Accepted : May 28 2009

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