Technological Progress and Optimum Labor Market Friction

Mazumder, Debojyoti (2017): Technological Progress and Optimum Labor Market Friction.

Abstract

This paper presents a stylized economy with a labor market characterized by search friction. Endogenous technological progress is the only source of growth. A single good is produced with the only factor of production, labor. It works as input in both production and R&D. The model derives the optimal job match that leads towards maximum long run gain, and this optimal can be achieved even without changing the economy’s growth rate. Model proposes, higher payment in R&D is optimal for high growing countries and/or countries with high labor market efficiency. The results are robust with tax-financing government expenditure and under stochastic fluctuations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Search and Matching friction; Labor Market; Technological progress
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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