Capital Accumulation and Employment Cycles in a Model of Creative Destruction

Arbeitspapier

A Schumpeterian growth model is constructed for an economy with wage bargaining. It is shown that the economy is subject to cycles in which capital, output and employment vary in fixed proportion. These increase through saving and capital accumulation until a new technology is introduced, at which moment they fall sharply due to obsolescence of capital. When the labour market is deregulated to weaken workers' position in bargaining, the labour-capital ratio increases but the average growth rate of the economy decreases. The growth cycle can be socially optimal. An elasticity rule is given for when the labour market should be regulated and when deregulated.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 855

Classification and Topics

• Classification: Wirtschaft
• Subject: growth ; cycles ; labour unions ; creative destruction

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Palokangas, Tapio
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/76448
• Last update: 10.03.2025, 11:43 AM CET