Journal of Economics

, Volume 86, Supplement 1, pp 77–118 | Cite as

Schumpeterian growth and the political economy of employment protection

  • Wolf-Heimo Grieben
Article
  • 64 Downloads

Abstract

This paper analyzes the differing attitudes concerning political support for employment protection between skilled and unskilled workers in a quality-ladder growth model. Creative destruction through innovation results in “Schumpeterian unemployment” of unskilled workers. By voting on firing costs, unskilled workers consider a trade-off between the benefit of fewer unemployment spells and the cost of lower quality growth of consumer goods. Skilled workers, although not threatened by unemployment, may vote for even larger firing costs. Alleviating one labor market rigidity by increasing the matching efficiency between firms and unskilled workers aggravates another rigidity by creating political support for additional firing costs.

Keywords

Non-Scale Growth Schumpeterian Unemployment Firing Costs 

JEL classification

J63 O33 E24 D72 

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Copyright information

© Springer-Verlag 2005

Authors and Affiliations

  • Wolf-Heimo Grieben
    • 1
  1. 1.Department of EconomicsUniversity of DortmundDortmundGermany

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