We introduce wage setting via efficiency wages in the neoclassical one-sector growth model to study the growth effects of wage inertia. We compare the dynamic equilibrium of an economy with wage inertia with the equilibrium of an economy without it. We show that wage inertia affects the long run...

The purpose of this paper is to introduce a noncompetitive labor market and unemployment into the growth models with exogenous saving rates found in economic growth textbooks (SalaiMartin, 2000; Barro and SalaiMartin, 2003; Romer, 2006). We first derive a general framework with a neoclassical production...

We analyze the transitional dynamics of a model with heterogeneous consumption goods. In this model, convergence is driven by two different forces: the typical diminishing returns to capital and the sectoral change inducing the variation in relative prices. We show that this second force a¤ects...

In a Walrasian labor market, the labor income share is constant under the assumptions of a Cobb-Douglas production function and perfect competition. Given the observed decline of the labor share in recent decades, this paper relaxes these assumptions, proposes a time-series calculation of the...

We analyze the equilibrium of a multi-sector exogenous growth model where the introduction of minimum consumption requirements drives structural change. We show that equilibrium dynamics simultaneously exhibt structural change and balanced growth of aggregate variables as is observed in US when...

In a Walrasian labor market, the labor income share is constant under the assumptions of a Cobb–Douglas production function and perfect competition. Given the observed decline of the labor share in recent decades, this paper relaxes these assumptions, proposes a time-series calculation of the...

We introduce wage setting via efficiency wages in the neoclassical one-sector growth model to study the growth effects of wage inertia. We compare the dynamic equilibrium of an economy with wage inertia with the equilibrium of an economy without it. We show that wage inertia affects the long run...