Productivity & Wages Under Technical Change

Daniele Tavani
Written By SCEPA

WORKING PAPER

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In a simple one-sector economy operating at full capacity, workers and firms bargain over wages and productivity gains taking into account the trade-offs faced by firms.

Institutional change, as captured by variations in workers’ bar- gaining power, has a positive effect on the rate of growth of output per worker but a negative effect on employment. Economic policy can also affect the growth and distribution pattern through changes in unemployment compen- sations, which also have a positive impact on labor productivity growth but a negative impact on employment.

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