On the Dynamics of Economic Growth When Unemployment is Persistent

16 Pages Posted: 3 May 2011 Last revised: 30 Dec 2012

See all articles by Alfred Greiner

Alfred Greiner

Bielefeld University - Department of Business Administration and Economics

Date Written: April 29, 2011

Abstract

In this paper we analyze the so-called AK endogenous growth model with persistent unemployment due to wages rigidities that result from labor market imperfections. We demonstrate that existence of a balanced growth path implies that it is unique or that there exist two balanced growth paths, depending on structural parameters of the model. The balanced growth path associated with the higher growth rate is saddle point stable whereas the path yielding the lower long-run growth rate is either stable or unstable. Further, we show that a Hopf bifurcation may arise giving rise to persistent limit cycles.

Keywords: Endogenous growth, unemployment, dynamics, Hopf bifurcation

JEL Classification: C61, E24, O41

Suggested Citation

Greiner, Alfred, On the Dynamics of Economic Growth When Unemployment is Persistent (April 29, 2011). Available at SSRN: https://ssrn.com/abstract=1825974 or http://dx.doi.org/10.2139/ssrn.1825974

Alfred Greiner (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

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