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From the Malthusian to the Modern Growth Regime in an OLG Model with Unions

By Luca Gori and Luciano Fanti

Abstract

The passage from the Malthusian Regime to the Modern Regime has been theoretically investigated only in recent times and the understanding of this process is still incomplete. This paper develops a neoclassical OLG model of neoclassical growth which embodies a stylised fact emerged in the second half of the XIX century, especially in European countries, that is the unionisation of labour markets and the diffusion of unemployment insurance systems. The results of this paper suggest that, differently from the previous literature, the diffusion of trade unions - which, causing a simultaneous increase of wages and unemployment, on the one hand reversed the effects of wage on fertility and on the other hand enhanced savings, capital accumulation and output in the long-run - may have triggered or at least favoured the passage.Economic Growth

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