Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76448
Authors: 
Palokangas, Tapio
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper 855
Abstract: 
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.
Subjects: 
growth
cycles
labour unions
creative destruction
Document Type: 
Working Paper

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