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A Note on How and Why Growth and Unemployment Go Hand in Hand in Developing Economies

Mandal, Biswajit and Mandal, Arindam (2014): A Note on How and Why Growth and Unemployment Go Hand in Hand in Developing Economies.

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Abstract

This paper develops a very simple model to explain the phenomenon of persistent unemployment even in an economy experiencing high output growth. Unemployment will also grow at a rate identical with other factors and sectors. The result is primarily triggered by pre-fixed minimum wage rate for unskilled workers. To corroborate our claim we have checked it for twelve developing countries and found empirical results quite consistent with theoretical apprehension. In deciding on desired rate of growth in different sectors to mitigate or reduce unemployment history becomes crucial.

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