In this paper we look at the long run growth implications of labour market distortions. The analysis is cast in a model where growth is generated by two alternative sources of enhancing labour productivity. The first is that workers before entering the job market may undertake schooling....

This paper revisits the role played by myopia in generating a theoretical rationale for pay-as-you-go social security in dynamically efficient economies. Contrary to received wisdom, if the real interest rate is exogenously fixed, enough myopia may justify public pensions but never alongside...

Capital market imperfections make the future purchasing power of wage income risky. Therefore, current nominal wages may have intertemporal implications which affect wage determination. The influence of consumption risk on wage setting is analysed in a general equilibrium model with an...

The role of demand management policies is considered in an intertemporal model for a two-sector open economy with labour market imperfections causing persistent unemployment. Structural unemployment is shown to depend on demand management policies, although demand expansion need not in general...

The notion of separation in cointegrated systems helps identifying possible sub-system structures that may reduce the complexity of larger systems by yielding a more parsimonous representation of the time series. In this paper we demonstrate that although the subsystem cointegration analysis in...

This paper derives a method for estimating and testing the Linear Quadratic Adjustment Cost (LQAC) model when the target variable and some of the forcing variables follow I(2) processes. Based on a forward-looking error-correction formulation of the model it is shown how to obtain strongly...