Unemployment and catching up: Europe vis-à-vis the USA

Henri L.F. De Groot, Anton B.T.M. Van Schaik

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This paper develops a two-region two-sector endogenous growth model with a dual labour market based on efficiency wages. Growth is driven by research done in the (high-tech) tradeables sector. The follower region tends to catch up in terms of labour productivity with the leader region. Differences in unemployment compensation systems can lead to relative convergence, i.e., a steady state with the backward region lagging behind the leader region. The reason for this is that high social welfare compensations generate high unemployment and reduce the amount of labour employed for R&D purposes.

Original languageEnglish
Pages (from-to)179-201
Number of pages23
JournalEconomist
Volume145
Issue number2
DOIs
Publication statusPublished - 1997

Keywords

  • Catching up
  • Dual economy
  • Efficiency wages
  • Endogenous growth

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