Marķa J Roa - Francisco J Vazquez - Dulce Saura
Labour Market, Demographic Transition and Economic Growth Cycles

Abstract: The purpose of this paper is to study the dynamic interaction between economic growth, labour market characteristic and population growth in a general model of economic growth. The dynamical results show that unemployment rate and per capita income dynamics fluctuate along cycles of different periods, and they may even have aperiodic paths. The characteristic of labour market institutions is the endogenous source of instability. In particular, as the rigidity of the labour market increases, the possibility of irregular behaviour increases as well. Moreover, in the same line as wage bargaining models, we get the result that the higher workers' bargaining power, the lower both employment rate and per capita production. Next, the introduction of endogenous population growth generates a demographic transition that affects the dynamics of unemployment and economic growth rate. Specifically, instability decreases (rises) when the population growth rate is growing (decreasing). This dynamic result is related to the population's age structure. Our results show a potential role for state intervention and labour market institutions in order to enhance growth and reduce its instability.

JEL: C61, O40, E24.
Keywords: labor market rigidities, growth,irregular fluctuations, demographic transition.



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