Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions

Been Lon Chen; Mei Hsu; Chih Fang Lai

doi:10.1016/j.jmacro.2016.10.004

Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions

Been Lon Chen, Mei Hsu, Chih Fang Lai

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

Abstract

Based on labor search models with an exogenous labor force, existing papers have found a negative relation between long-run economic growth and unemployment. Motivated by the fact that the labor force participation has changed substantially across OECD countries, this paper revisits the long-run relation by taking account of endogenous labor-force participation. We find that, via the effects on employment, changes in labor market institutions may increase or decrease long-run economic growth. Moreover, depending upon the effects on the labor force and employment, these labor market institutions may increase or decrease unemployment rates in the long run. Thus, changes in labor market institutions lead to a non-monotone relation between long-run economic growth and unemployment that is consistent with the data.

Original language	English
Pages (from-to)	273-292
Number of pages	20
Journal	Journal of Macroeconomics
Volume	50
DOIs	https://doi.org/10.1016/j.jmacro.2016.10.004
Publication status	Published - 2016 Dec 1

Keywords

Economic growth
Labor force
Unemployment

ASJC Scopus subject areas

Economics and Econometrics

UN SDGs

This output contributes to the following Sustainable Development Goal(s)

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10.1016/j.jmacro.2016.10.004

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title = "Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions",

abstract = "Based on labor search models with an exogenous labor force, existing papers have found a negative relation between long-run economic growth and unemployment. Motivated by the fact that the labor force participation has changed substantially across OECD countries, this paper revisits the long-run relation by taking account of endogenous labor-force participation. We find that, via the effects on employment, changes in labor market institutions may increase or decrease long-run economic growth. Moreover, depending upon the effects on the labor force and employment, these labor market institutions may increase or decrease unemployment rates in the long run. Thus, changes in labor market institutions lead to a non-monotone relation between long-run economic growth and unemployment that is consistent with the data.",

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AU - Chen, Been Lon

AU - Hsu, Mei

AU - Lai, Chih Fang

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Y1 - 2016/12/1

N2 - Based on labor search models with an exogenous labor force, existing papers have found a negative relation between long-run economic growth and unemployment. Motivated by the fact that the labor force participation has changed substantially across OECD countries, this paper revisits the long-run relation by taking account of endogenous labor-force participation. We find that, via the effects on employment, changes in labor market institutions may increase or decrease long-run economic growth. Moreover, depending upon the effects on the labor force and employment, these labor market institutions may increase or decrease unemployment rates in the long run. Thus, changes in labor market institutions lead to a non-monotone relation between long-run economic growth and unemployment that is consistent with the data.

AB - Based on labor search models with an exogenous labor force, existing papers have found a negative relation between long-run economic growth and unemployment. Motivated by the fact that the labor force participation has changed substantially across OECD countries, this paper revisits the long-run relation by taking account of endogenous labor-force participation. We find that, via the effects on employment, changes in labor market institutions may increase or decrease long-run economic growth. Moreover, depending upon the effects on the labor force and employment, these labor market institutions may increase or decrease unemployment rates in the long run. Thus, changes in labor market institutions lead to a non-monotone relation between long-run economic growth and unemployment that is consistent with the data.

KW - Economic growth

KW - Labor force

KW - Unemployment

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Relation between growth and unemployment in a model with labor-force participation and adverse labor institutions

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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