Labour Market Rigidity and Economic Efficiency with Non-General Purpose Technical Change

Grimalda, Gianluca (1971): Labour Market Rigidity and Economic Efficiency with Non-General Purpose Technical Change.

Abstract

The contrasting effects of labour market rigidity on efficiency are investigated in a model where technological change is non-general purpose and different types of skills are available to workers. Ex ante efficiency calls for high labour market rigidity, as this favours workers’ acquisition of specific skills which have higher productivity in equilibrium. Ex post efficiency calls for low market rigidity, as this allows more workers to transfer to the innovating sector of the economy. The trade-off between these two mechanisms results in an inverse-U shaped relationship between output and labour market rigidity, which implies that a positive level of labour market rigidity is in general beneficial for the economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Non-general purpose technology, labour market rigidity, specific and general human capital
• Subjects: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity

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