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Growth–Employment Relationship and Leijonhufvud's Corridor

Published online by Cambridge University Press:  17 August 2016

Jean-Marie Le Page
Jean-Marie Le Page*
Affiliation:
Paris II Panthéon-Assas University Paris, France
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Summary

Since 2008, the euro area unemployment rate has increased constantly, while this economy's GDP was the same at the end of 2012 as it was in 2008. The recent trend of aggregate economic activity in this area illustrates the risk that an economy leaves its stability corridor, in which it usually progresses in a cyclical way, to enter an area of turbulence. In this area, the automatic stabilizers have weak feedback forces. To examine this kind of situation in a theoretical framework, this paper presents a model that relies both on Leijonhufvud's corridor and on Harrod's instability principle. This model allows a threshold to be defined beyond which the economy runs the risk of entering a cumulative process of simultaneous declines in growth and employment. However, the existence of such a process requires unemployment to have a sufficiently direct effect on the growth in aggregate demand, as seems to be the case nowadays.

À partir de 2008, le taux de chômage de la zone euro n'a cessé d'augmenter alors que le PIB de cette zone était encore à la fin de 2012 au même niveau qu'en 2008. Cette évolution récente de l'activité globale illustre le risque couru par une économie de quitter le couloir de stabilité à l'intérieur duquel elle progresse d'une manière cyclique pour entrer dans une zone de turbulence. Dans cette zone, les stabilisateurs automatiques n'exercent qu'une faible force de rappel. Pour étudier à un niveau théorique ce type de situation, cet article présente un modèle qui associe le corridor de Leijonhufvud au principe d'instabilité de Harrod. Ce modèle met en évidence un seuil au-delà duquel l'économie risque de connaître un processus cumulatif de déclin simultané de la croissance et de l'emploi. Un tel mécanisme n'existe cependant que lorsque le chômage a une influence directe sur la demande globale comme cela semble être le cas dans la période actuelle.

Keywords

Growth—employment relationshipeconomic dynamicsinstability principlecorridorB22E12E24Relation croissance-emploidynamique économiqueprincipe d’instabilitécorridor de LeijonhufvudB22E12E24
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 80 , Issue 2 , 2014 , pp. 111 - 124
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2015 

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Footnotes

1

I am grateful for helpful comments and suggestions from an anonymous reviewer. Paris II Panthéon-Assas University, Paris, France; mail address (personal); 37, rue du départ, 75014 Paris; E-mail: [email protected]; Tel: (33)1 43 22 20 27.

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