Growth and unemployment : theory, evidence and policy
Title: Growth and unemployment : theory, evidence and policy
Author: ZAGLER, Martin
Citation: International journal of economic perspectives, 2007, Vol. 1, No. 4, pp. 228-242
Economic growth is driven by structural change. Structural change does not come without a cost, and the most evident social cost is high and persistent unemployment. This relation seems trivial. The more it comes as a surprise that the standard economic model appears ignorant to the relation between unemployment, structural change, and economic growth. The aim of this paper is therefore twofold. First, it places the topic in perspective by presenting the textbook model of unemployment and growth to show the dichotomy between the determination of unemployment and the driving forces of economic growth. Second, it sets up an encompassing model and discusses recent attempts in the literature to incorporate the relation between growth and unemployment as special cases. After reviewing supportive empirical evidence and presenting empirical work on the matter, the paper draws policy conclusions that promote economic growth and reduce unemployment.
Subject: J60; O40; Economic growth; Unemployment; Europe
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