The Struggle for Rents in a Schumpterian Economy

This paper develops a two-sector endogenous growth model with a dual labour market. Trade unions strive for the extraction of as high a rent as possible from the growth generating imperfectly competitive primary sector. This union behaviour results in a non-competitive wage differential between the primary and secondary (perfectly competitive) sector. The consequence of this distortion is the coming about of wait unemployment, i.e., unemployed queuing for high-paid jobs. Employment and growth are negatively dependent on the relative strength of the union. An increase in concentration in the high-tech sector is good for growth and employment.endogenous growth;trade unions;unemployment;dual labour markets;non-competitive wage differentials

The Determination and Development of Sectoral Structure

The development over time of sectors in terms of value added and employment has common characteristics in all economies. We develop a simple Ricardian multi-sector general equilibrium model that allows for (i) non-unitary income elasticities, (ii) different paces of technological progress per sector, and (iii) endogenously determined technological progress per sector. A model with these ingredients allows us to replicate the sectoral developments that are found empirically, and which are shown to be the outcome of an interplay between factors of demand and supply. Under reasonable assumptions, deindustrialization is shown to be a natural and unavoidable consequence of increases in the wealth of nations.sectoral change;endogenous growth;deindustrialization

Macroeconomic Consequences of Outsourcing. An Analysis of Growth, Welfare and Product Variety

Outsourcing of non-core activities by firms is nowadays a common business strategy. This paper provides a theoretical framework for analyzing a firms’ incentive to follow such a strategy and its consequences for macroeconomic variables like growth and product variety. We divide production activities into core and non-core activities. Non-core activities can be performed within the firm or can be mediated by the market. We will derive conditions under which outsourcing will occur, and under which outsourcing will be socially desirable. These conditions do not necessarily coincide due to two externalities. Outsourcing may hence be a profitable strategy for firms, while it is socially suboptimal. Crucial parameters in the model are the relative scale of core versus non-core activities, traditional management costs, transaction costs and taste for variety of consumers. This paper suggests that declining transaction costs are a crucial factor in explaining the observed increase in outsourcing.outsourcing;endogenous growth;product variety;transaction costs;welfare

The Struggle for Rents in a Schumpterian Economy

This paper develops a two-sector endogenous growth model with a dual labour market. Trade unions strive for the extraction of as high a rent as possible from the growth generating imperfectly competitive primary sector. This union behaviour results in a non-competitive wage differential between the primary and secondary (perfectly competitive) sector. The consequence of this distortion is the coming about of wait unemployment, i.e., unemployed queuing for high-paid jobs. Employment and growth are negatively dependent on the relative strength of the union. An increase in concentration in the high-tech sector is good for growth and employment.

Unemployment and endogenous growth

In this paper we develop a two-sector endogenous growth model with a dual labour market, based on efficiency wages. Growth is driven by intentional R&D performed in the high-tech and high-wage sector. It is examined how a change in rivalry among firms affects simultaneously growth and unemployment. On the one hand, an increase of the elasticity of substitution between the product varieties of different high-tech firms reduces market power and leads to higher growth but reduces job prospects. On the other hand, if barriers to entry exist, an increase of the number of rivals in the market (due to removal of entry barriers) leads to lower growth, whereas the effect on aggregate employment is ambiguous.Economic Growth;Wages;Unemployment;Labour Market;Growth Models;labour economics

Macroeconomic Consequences of Outsourcing. An Analysis of Growth, Welfare and Product Variety

Outsourcing of non-core activities by firms is nowadays a common business strategy. This paper provides a theoretical framework for analyzing a firms’ incentive to follow such a strategy and its consequences for macroeconomic variables like growth and product variety. We divide production activities into core and non-core activities. Non-core activities can be performed within the firm or can be mediated by the market. We will derive conditions under which outsourcing will occur, and under which outsourcing will be socially desirable. These conditions do not necessarily coincide due to two externalities. Outsourcing may hence be a profitable strategy for firms, while it is socially suboptimal. Crucial parameters in the model are the relative scale of core versus non-core activities, traditional management costs, transaction costs and taste for variety of consumers. This paper suggests that declining transaction costs are a crucial factor in explaining the observed increase in outsourcing.