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Unemployment and Productivity Growth: An Empirical Analysis within the Augmented Solow Model

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  • Michael Bräuninger
  • Markus Pannenberg

Abstract

Does a country's level of unemployment have an impact on the long-run growth rate? Incorporating unemployment into a generalised Solow-type growth model, yields some answers. In the traditional Solow model, unemployment has no long-run influence on the growth rate and the level of productivity. The long-run level of productivity is reduced if higher unemployment leads to less formal education or to less learning-by-doing. If we allow for endogenous growth, unemployment reduces long-run productivity growth. Using panel data from 13 OECD countries from 1960 to 1990, we find evidence that an increase in unemployment scales down the long-run level of productivity.

Suggested Citation

  • Michael Bräuninger & Markus Pannenberg, 2000. "Unemployment and Productivity Growth: An Empirical Analysis within the Augmented Solow Model," Discussion Papers of DIW Berlin 230, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp230
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    Cited by:

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    5. Rıza BAYRAK & Halim TATLI, 2016. "Short and long term analysis of some factors effecting youth unemployment in Turkey," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(608), A), pages 229-242, Autumn.
    6. Erygit Pinar & Cura Serkan & Zungun Deniz & Ortanca Murat, 2014. "Econometric Evaluation Of The Relationship Economic Growth And Unemployment In Eu & Turkey," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 452-462, July.
    7. Wali Aya Rumbia & Abd Azis Muthalib & Bakhtiar Abbas & Pasrun Adam & Asrul Jabani & Yuwanda Purnamasari Pasrun & Dzulfikri Azis Muthalib, 2022. "The Asymmetry Effect of Oil Consumption, Unemployment and Broadband Technology on Economic Growth in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 12(2), pages 276-281, March.
    8. KAMGNIA, Dia B., 2009. "Growth Intensity Of Employment In Africa: A Panel Data Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(2).
    9. Shevelova, Anastasia & Machukha, Ielyzaveta & Motliuk, Mark & Kulinich, Volodymyr, 2023. "A Comprehensive Regression Study on the Drivers of Labour Productivity," MPRA Paper 118622, University Library of Munich, Germany.
    10. Joachim Thøgersen, 2010. "Unemployment, Public Pensions, and Capital Accumulation: Assessing Growth Effects of Alternative Funding Strategies," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(3), pages 502-520, September.
    11. Michaelis, Jochen & Birk, Angela, 2006. "Employment- and growth effects of tax reforms," Economic Modelling, Elsevier, vol. 23(6), pages 909-925, December.
    12. Michael Bräuninger, 2005. "Social Security, Unemployment, and Growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 423-434, August.
    13. Lutz G. Arnold, 2006. "Does the Choice between Wage Inequality and Unemployment Affect Productivity Growth?," German Economic Review, Verein für Socialpolitik, vol. 7(1), pages 87-112, February.
    14. Onafowora, Olugbenga A. & Owoye, Oluwole, 2024. "Trade openness, governance quality, and economic growth in Latin America and the Caribbean," International Economics, Elsevier, vol. 179(C).
    15. repec:bla:germec:v:7:y:2006:i::p:87-112 is not listed on IDEAS
    16. Maynou, Laia & Ordóñez, Javier & Silva, José Ignacio, 2022. "Convergence and determinants of young people not in employment, education or training: An European regional analysis," Economic Modelling, Elsevier, vol. 110(C).
    17. Rıza BAYRAK & Halim TATLI, 2016. "Short and long term analysis of some factors effecting youth unemployment in Turkey," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 229-242, Autumn.
    18. Jonathan Eberle & Thomas Brenner, 2016. "More bucks, more growth, more justice? The effects of regional structural funds on regional economic growth and convergence in Germany," Working Papers on Innovation and Space 2016-01, Philipps University Marburg, Department of Geography.
    19. Bavaro, Michele & Tullio, Federico, 2024. "A cycle or a tunnel? A study on unemployment and low-pay dynamics in Italy," Labour Economics, Elsevier, vol. 90(C).
    20. Eva, MORENO-GALBIS, 2004. "Unemployment and Endogenous Growth with Capital-Skill Complementarity," LIDAM Discussion Papers IRES 2004001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    21. Lingens, Jorg, 2007. "Unions, wage setting, and economic growth," Economic Modelling, Elsevier, vol. 24(1), pages 167-188, January.
    22. João Amador & Ana Fernandes, 2022. "The competitiveness of the Portuguese economy: A view from a composite indicator," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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    More about this item

    Keywords

    Growth; Equilibrium Unemployment; Panel Data;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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