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Schumpeterian growth and the political economy of employment protection

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  • Wolf-Heimo Grieben

Abstract

This paper analyzes the differing attitudes concerning political support for employment protection between skilled and unskilled workers in a quality-ladder growth model. Creative destruction through innovation results in “Schumpeterian unemployment” of unskilled workers. By voting on firing costs, unskilled workers consider a trade-off between the benefit of fewer unemployment spells and the cost of lower quality growth of consumer goods. Skilled workers, although not threatened by unemployment, may vote for even larger firing costs. Alleviating one labor market rigidity by increasing the matching efficiency between firms and unskilled workers aggravates another rigidity by creating political support for additional firing costs. Copyright Springer-Verlag 2005

Suggested Citation

  • Wolf-Heimo Grieben, 2005. "Schumpeterian growth and the political economy of employment protection," Journal of Economics, Springer, vol. 86(1), pages 77-118, December.
    • Handle: RePEc:kap:jeczfn:v:86:y:2005:i:1:p:77-118
    DOI: 10.1007/BF03051801
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    Cited by:

    1. Wolf-Heimo Grieben, 2006. "Globalization with Labor Market Frictions and Non-Scale Growth," DEGIT Conference Papers c011_053, DEGIT, Dynamics, Economic Growth, and International Trade.

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    More about this item

    Keywords

    Non-Scale Growth; Schumpeterian Unemployment; Firing Costs; J63; O33; E24; D72;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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