GROWTH, UNEMPLOYMENT AND THE WAGE SETTING PROCESS.



provided by Research Papers in Economics

Growth, Unemployment and the Wage Setting
Process

Valeri Sorolla-i-Amat*

Departament d’Economia i d’Historia Economica
Universitat Autonoma de Barcelona

08193 Bellaterra, Spain

T. 343-5812728, Fax 343-5812012, e-mail [email protected]
W.P. UAB-IAE 458.00

May 23, 2000

Abstract

We analyze, using an standard OLG model with a non competitive
labour market, under which conditions a lower unemployment rate is as-
sociated with a higher unemployment benefit. We also study the dynamics
of growth and unemployment and we check if there is no relationship be-
tween growth and unemployment in the long run. The main results are:
1) If the government cares sufficiently about unemployed workers, then
a lower unemployment rate is associated with a higher unemployment
benefit. 2) The relationship between growth and unemployment in the
long run is weak in the sense that only the rate of growth of productivity
from all the parameters of the model affects both in the long run when
in wage setting process past wages and the present unemployment benefit
are taken into account.

Abstract

Analizamos, con un modelo de generaciones solapadas standard y mer-
cado de trabajo no competitivo, bajo que condiciones una tasa de paro
mas baja esta asociada con un subsidio de paro mas alto. Tambien es-
tudiamos la dinamica del crecimiento y el paro y comprobamos si en el
largo plazo estan relacionados. Los resultados principales son: 1) Si el
gobierno se preocupa lo suficientemente de los trabajadores desempleados
una tasa de paro mas baja esta asociada con un subsidio de paro mas
alto. 2) La relacion entre crecimiento y paro en el largo plazo es debil en
el sentido de que solo la tasa de crecimiento de la productividad, entre to-
dos los parametros del modelo, afecta a las dos variables en el largo plazo,
cuando en el proceso de determinacion de salarios se tienen en cuenta los
salarios pasados y presentes.

* Finantial support from the Spanish Ministry of Education through DGICYT grant PB96-
1160-C02-02 is gratefully acknowledged.



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