Economic Growth Theory

Chapter 7 Growth, Unemployment and Welfare

One of the basic questions in economic theory is why modern economies are incapable of employing, fully and efficiently, their available resources. Unemployment of labor force seems to attract a greatest attention of researchers. Unemployed men cost society dearly. They may diminish their human capital through different kinds of 'depreciation'. A high rate of unemployment is often associated with social unrest and high crime rates. Unused physical capital causes less attention than unemployed people perhaps because the former does not cause social troubles. In many countries, high unemployment is persistent. In 1995, for instance, the proportion of unemployed workers who had been unemployed for more ...