Unemployment and Productivity Growth

Arbeitspapier

Does a country?s level of unemployment have an impact on the long-run growth rate? Incorporating unemployment into a generalised augmented Solow-type growth model, yields some answers to this question. In particular, we show that the impact of unemployment on productivity growth heavily depends on the influence of human capital in the production function. In the traditional Solow model, unemployment has neither an influence on long-run productivity growth nor on the long-run level of productivity. However, if human capital matters, unemployment has a long-run effect on the level of productivity. Moreover, if we allow for endogenous growth within our theoretical framework, unemployment has an impact on long-run productivity growth. Using data from 13 OECD countries from 1960 to 1990 within a dynamic panel data framework, we find supportive evidence that an increase in unemployment indeed reduces the long-run level of productivity. Taken at face value our results suggest that if unemployment would have remained at the level of 1960 then productivity today would be roughly 10% higher than it is.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 136

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Economic Growth and Aggregate Productivity: General ; Comparative Studies of Countries
• Subject: Growth ; equilibrium unemployment ; panel data ; Arbeitslosigkeit ; Wirtschaftswachstum ; Produktivität ; Wachstumstheorie ; Solow-Modell ; Humankapital ; Neue Wachstumstheorie ; Schätzung ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bräuninger, Michael ; Pannenberg, Markus
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/20976
• Last update: 10.03.2025, 11:44 AM CET