Unemployment, Capital-Labor Substitution, and Economic Growth

March 1, 1999

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Format: Chicago

Bob Rowthorn. Unemployment, Capital-Labor Substitution, and Economic Growth, (USA: International Monetary Fund, 1999) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper discusses the influence of economic growth on the equilibrium unemployment rate (NAIRU). It examines how income distribution and the NAIRU are influenced by capital formation, technical progress, and labor force expansion, and how these factors’ impact depends on the elasticity of substitution between capital and labor. The paper distinguishes between the short-run NAIRU when capital stock is exogenous, and the long-run NAIRU when it is endogenous. It also considers how the analysis must be modified to take into account Keynesian ideas concerning the role of aggregate demand. It concludes that unless the capital stock grows in line with labor supply in efficiency units, the short-run NAIRU will increase, reducing the scope for demand stimulation.

Subject: Employment, Labor, Labor demand, Real wages, Unemployment, Wages

Keywords: Bargaining, Capital, Capital formation, Capital stock, Demand curve, Elasticity of Substitution, Employment, Equilibrium unemployment, Europe, Impact wage settlement, Labor demand, Money wage, Product market, Real wages, Technical Progress, Unemployment, Wage bargainer, Wage cut, Wage determination, Wage rate, Wage-price spiral, Wages, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/043
Stock No:

WPIEA0431999
ISBN:

9781451846300
ISSN:

1018-5941

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