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Can labour market rigidity foster economic efficiency? A model with non-general purpose technical change

Can labour market rigidity foster economic efficiency? A model with non-general purpose technical... The contrasting effects of labour market rigidity on efficiency are investigated in a model where technological change is non-general purpose and different types of skills are available to workers. Ex ante efficiency calls for high labour market rigidity, as this favours workers’ acquisition of specific skills which have higher productivity in equilibrium. Ex post efficiency calls for low market rigidity, as this allows more workers to transfer to the innovating sector of the economy. The trade-off between these two mechanisms results in an inverse-U shaped relationship between output and labour market rigidity, which implies that a positive level of labour market rigidity is in general beneficial for the economy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Eurasian Business Review Springer Journals

Can labour market rigidity foster economic efficiency? A model with non-general purpose technical change

Eurasian Business Review , Volume 6 (1) – Jul 9, 2015

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References (61)

Publisher
Springer Journals
Copyright
Copyright © 2015 by Eurasia Business and Economics Society
Subject
Business and Management; Business and Management, general
ISSN
1309-4297
eISSN
2147-4281
DOI
10.1007/s40821-015-0024-2
Publisher site
See Article on Publisher Site

Abstract

The contrasting effects of labour market rigidity on efficiency are investigated in a model where technological change is non-general purpose and different types of skills are available to workers. Ex ante efficiency calls for high labour market rigidity, as this favours workers’ acquisition of specific skills which have higher productivity in equilibrium. Ex post efficiency calls for low market rigidity, as this allows more workers to transfer to the innovating sector of the economy. The trade-off between these two mechanisms results in an inverse-U shaped relationship between output and labour market rigidity, which implies that a positive level of labour market rigidity is in general beneficial for the economy.

Journal

Eurasian Business ReviewSpringer Journals

Published: Jul 9, 2015

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