Unemployment and the Productivity Slowdown: An Efficiency Wage Perspective

Japanese Economic Review, Forthcoming

Posted: 13 Jun 2010

See all articles by Tetsugen Haruyama

Tetsugen Haruyama

Kobe University - Graduate School of Economics

Campbell Leith

University of Glasgow - Department of Economics

Date Written: June 11, 2010

Abstract

Many OECD economies suffered a productivity slowdown beginning in the early 1970s. However, the increase in unemployment that followed this slowdown was more pronounced in European economies relative to the USA. In this paper we present an efficiency wage model, which enables us to identify two basic channels through which the productivity slowdown can affect workers' effort incentives. Predictions of the model are consistent with the different trends in unemployment across countries over this period in the face of a similar slowdown in productivity. We also demonstrate how the link between growth and unemployment depends upon labour market institutions in such a way that we can reconcile the mixed empirical results observed in the literature.

Keywords: Productivity growth, unemployment

JEL Classification: O30, J60

Suggested Citation

Haruyama, Tetsugen and Leith, Campbell, Unemployment and the Productivity Slowdown: An Efficiency Wage Perspective (June 11, 2010). Japanese Economic Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1623723

Tetsugen Haruyama (Contact Author)

Kobe University - Graduate School of Economics ( email )

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HOME PAGE: http://www.econ.kobe-u.ac.jp/~haruyama/

Campbell Leith

University of Glasgow - Department of Economics ( email )

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Glasgow, Scotland G12 8RT
United Kingdom
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++44 141 330 4940 (Fax)

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