De Economist

, Volume 145, Issue 2, pp 179–201 | Cite as

Unemployment and Catching Up: Europe Vis-à-vis the USA

  • Henri L.F. De Groot
  • Anton B.T.M. Van Schaik
Article

Abstract

This paper develops a two-region two-sector endogenous growth model with a dual labour market based on efficiency wages. Growth is driven by research done in the (high-tech) tradeables sector. The follower region tends to catch up in terms of labour productivity with the leader region. Differences in unemployment compensation systems can lead to relative convergence, i.e., a steady state with the backward region lagging behind the leader region. The reason for this is that high social welfare compensations generate high unemployment and reduce the amount of labour employed for R&D purposes.

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Copyright information

© Kluwer Academic Publishers 1997

Authors and Affiliations

  • Henri L.F. De Groot
    • 1
  • Anton B.T.M. Van Schaik
    • 1
  1. 1.Tilburg University and CentERTilburgThe Netherlands

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