Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104973
Authors: 
Tesfaselassie, Mewael
Year of Publication: 
2014
Series/Report no.: 
Kiel Working Paper 1978
Abstract: 
The standard search model of unemployment predicts, under plausible assumptions about household preferences, that disembodied technological progress leads to higher unemployment. This prediction is at odds with the experience of industrialized countries in the 1970s. This paper shows that augmenting the model with nominal price rigidity goes towards reconciling the model's prediction. In the presence of nominal price rigidity faster growth is shown to lead to lower unemployment if the rate of inflation is relatively high, as was the case in the 1970s. In general, the effect of growth on unemployment is shown to be non-monotonic. There is a threshold level of inflation below (above) which faster growth leads to higher (lower) unemployment.
Subjects: 
growth
trend inflation
unemployment
JEL: 
E24
E31
Document Type: 
Working Paper

Files in This Item:
File
Size
226.51 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.