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Has the Tradeoff Between Productivity Gains and Job Growth Disappeared?

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  • Paul Cavelaars

Abstract

‘Policymakers’ efforts to boost trend output growth may be hampered by the presence of a trade‐off between productivity gains and job creation. This paper presents empirical evidence that the negative relationship between productivity growth and employment growth that prevailed in the 1960s and 1970s has disappeared since then. This finding is robust to using alternative measures and including other explanatory variables. The improved trade‐off may be good news for policymakers who aim at raising the ‘speed limit’ of the economy. Die Bemühungen der politischen Entscheidungsträger, das Produktionswachstum nachhaltig anzu‐kurbeln, können durch einen Trade‐Off zwischen Produktivitätssteigerung und Schaffung von Arbeitsplätzen behindert werden. Der vorliegende Artikel erbringt empirische Belege dafür, dass heute das negative Verhältnis zwischen Produktivitätssteigerung und Zunahme der Beschäftigung, wie man es in den 1960er und 70er Jahren beobachtete, nicht mehr besteht. Dieses Ergebnis hält auch alter‐nativen Messmethoden und der Berücksichtigung anderer erklärender Variablen stand und könnte eine gute Nachricht für die Politiker sein, die bestrebt sind, die ‘Höchstgeschwindigkeit’ für das Wirtschaftswachstum anzuheben.

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  • Paul Cavelaars, 2005. "Has the Tradeoff Between Productivity Gains and Job Growth Disappeared?," Kyklos, Wiley Blackwell, vol. 58(1), pages 45-64, February.
    • Handle: RePEc:bla:kyklos:v:58:y:2005:i:1:p:45-64
    DOI: 10.1111/j.0023-5962.2005.00277.x
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    1. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
    2. Alessandra Colecchia & Paul Schreyer, 2001. "ICT Investment and Economic Growth in the 1990s: Is the United States a Unique Case? A Comparative Study of Nine OECD Countries," OECD Science, Technology and Industry Working Papers 2001/7, OECD Publishing.
    3. Gordon, Robert J, 1995. "Is There a Trade-off between Unemployment and Productivity Growth?," CEPR Discussion Papers 1159, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Blien, Uwe & Sanner, Helge, 2006. "Structural change and regional employment dynamics," IAB-Discussion Paper 200606, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    2. G. Blind & A. Pyka, 2014. "The rule approach in evolutionary economics: A methodological template for empirical research," Journal of Evolutionary Economics, Springer, vol. 24(5), pages 1085-1105, November.
    3. Blien, Uwe & Sanner, Helge, 2015. "Structural change and regional employment development," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113162, Verein für Socialpolitik / German Economic Association.
    4. Tyrowicz, Joanna, 2009. "When Eastern Labour Markets Enter Western Europe CEECs. Labour Market Institutions upon Euro Zone Accession," MPRA Paper 15045, University Library of Munich, Germany.
    5. Albert van der Horst & Hugo Rojas-Romagosa & Leon Bettendorf, 2009. "Does employment affect productivity?," CPB Discussion Paper 119, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Florian Noseleit, 2020. "The Role of Entry and Market Selection for the Dynamics of Regional Diversity and Specialization," Regional Studies, Taylor & Francis Journals, vol. 49(1), pages 76-94, July.
    7. Marcus Neureiter & Peter Nunnenkamp, 2010. "Outsourcing Motives, Location Choice and Labour Market Implications: An Empirical Analysis for European Countries," Kyklos, Wiley Blackwell, vol. 63(2), pages 206-230, May.
    8. Feng Liu & Kangning Xu & Meina Zheng, 2018. "The Effect of Environmental Regulation on Employment in China: Empirical Research Based on Individual-Level Data," Sustainability, MDPI, vol. 10(7), pages 1-23, July.
    9. Albert van der Horst & Hugo Rojas-Romagosa & Leon Bettendorf, 2009. "Does employment affect productivity?," CPB Discussion Paper 119.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Blind, Georg & Lottanti von Mandach, Stefania, 2015. "Not a Coincidence: Sons-in-Law as Successors in Successful Japanese Family Firms," MPRA Paper 66695, University Library of Munich, Germany.
    11. Mark Partridge & Alexandra Tsvetkova & Michael Betz, 2021. "Are the most productive regions necessarily the most successful? Local effects of productivity growth on employment and earnings," Journal of Regional Science, Wiley Blackwell, vol. 61(1), pages 30-61, January.
    12. Krzysztof Bartosik, 2010. "Wpływ wydajności pracy na zatrudnienie w polskim przemyśle przetwórczym," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 7-8, pages 1-19.
    13. Luis A. Gil-Alana & Marinko Skare, 2018. "Testing the great decoupling: a long memory approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(4), pages 801-820, November.
    14. Florian Noseleit, 2011. "Market Selection and Regional Diversification - Empirical Regularities from German Panel-Data," ERSA conference papers ersa10p1117, European Regional Science Association.
    15. Hervé Boulhol & Laure Turner, 2009. "Employment-Productivity Trade-off and Labour Composition," OECD Economics Department Working Papers 698, OECD Publishing.

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