Endogenous Growth and Equilibrium Unemployment in a North-South Model of the World Economy

A North-South model is developed which incorporates an endogenous rate of equilibrium unemployment in the North in the context of long-run growth. It is shown how increases in the size of public debt and unemployment compensation financed by payroll taxation, all measured relative to productivity, r...

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Bibliographic Details
Main Author: HOON, Hian Teck
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2002
Subjects:
Online Access:https://ink.library.smu.edu.sg/soe_research/496
https://ink.library.smu.edu.sg/context/soe_research/article/1495/viewcontent/EndogenousGrowth_2002_RDE.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:A North-South model is developed which incorporates an endogenous rate of equilibrium unemployment in the North in the context of long-run growth. It is shown how increases in the size of public debt and unemployment compensation financed by payroll taxation, all measured relative to productivity, raise the Northern natural rate of unemployment and, consequently, reduce the global rate of long-run growth. The effect of the shocks is also to drive down the rate of employment expansion in the South. A set of the fundamental determinants of the world terms of trade is obtained, which includes policy parameters.