A General Framework for Growth Models with Non-Competitive Labor and Product Markets and Disequilibrium Unemployment

• Authors: Valeri Sorolla.
• BSE Working Paper: 112306 | September 15
• Keywords: growth , Wage setting , Disequilibrium Unemployment
• JEL codes: E24, O41
• growth
• Wage setting
• Disequilibrium Unemployment

In this paper we derive the general framework for growth models with non competitive labor and output markets and disequilibrium unemployment. For the three standard ways of generating savings, the framework makes clear how capital growth depends on employment and employment on the stock of capital and how both variables depend on the real wage and the markup. Then we analyze the long run relationship between growth and unemployment for some standard wage setting rules: constant real wages, rules that imply a constant unemployment rate and rules with inertia on wages and labor incomes, paying special attention to the neoclassical production function with in…finite horizon consumers, the Ramsey model (the canonical model of growth) with unemployment.