Labor Market Dynamics and Growth

Jake Bradley, Axel Gottfries

Research output: Working paperDiscussion paper

Abstract / Description of output

We embody a technological diffusion process into the canonical search and matching model of the labor market. New matches imitate the production process of incumbents. The resulting model retains the features of a labor search model whilst also generating endogenous growth through creative destruction. The model is calibrated to standard moments from the US labor market and generates, consistent with data, an order of magnitude more amplification in unemployment than a similarly calibrated model without endogenous growth. The model provides a natural framework to decompose the sources of growth based on labor market flows. Using cross-country data for 32 countries across a broad range of development, we find that growth via creative destruction is quantitatively more important for developing countries.
Original languageEnglish
PublisherEdinburgh School of Economics, University of Edinburgh
Number of pages54
Publication statusPublished - 12 Jul 2022

Publication series

NameEdinburgh School of Economics Discussion Paper Series
PublisherEdinburgh School of Economics, University of Edinburgh


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