Arbeitspapier

Capital Accumulation and Employment Cycles in a Model of Creative Destruction

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.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 855

Classification
Wirtschaft
Subject
growth
cycles
labour unions
creative destruction

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

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Palokangas, Tapio
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2003

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