Journal of Evolutionary Economics

, Volume 10, Issue 5, pp 557–583 | Cite as

A Schumpeterian model of equilibrium unemployment and labor turnover

  • M. Fuat Şener


This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase in the size of innovations or skilled labor saving technological change in R&D activity.

In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate. First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate – the creative destruction effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment rate – the resource reallocation effect.

Key words: Frictional unemployment – Wage inequality – Endogenous growth – Job-matching 
JEL-classification: J31, J63, O30 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2000

Authors and Affiliations

  • M. Fuat Şener
    • 1
  1. 1.Department of Economics, Social Sciences Building, Union College, Schenectady, NY 12308, USA (e-mail:

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