Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Growth theory No. F06-V2
An examination of regional unemployment rates reveals that there are vast differences which cannot be explained by different institutional. Our paper traces these differences in the regions labour market performance back to the regions specialisation in products that are more or less advanced in their product cycle. The model we develop shows how profit maximisation and its interaction with individual preferences endogenously lead to initially increasing and then decreasing employment in the presence of process innovation. We show how processes of structural change develop in time and how they are linked to technological progress.