Reswitching and Labor Market Rigidity: New Results with Empirical Implications from a Classical Growth Model

doi:10.21203/rs.3.rs-2191165/v1

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Reswitching and Labor Market Rigidity: New Results with Empirical Implications from a Classical Growth Model

https://doi.org/10.21203/rs.3.rs-2191165/v1

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We demonstrate a new result regarding reswitching within a classical growth framework. The question of reswitching comes down to a question of factor market substitutability. The assumption of full employment due to a wage adjustment mechanism eliminates a perverse switch point as a stable equilibrium outcome. Implications for future empirical work on reswitching and perverse switches are explored.

JEL CODES: 04, B23

Reswitching

Capital Controversies

Growth Theory

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Reswitching and Labor Market Rigidity: New Results with Empirical Implications from a Classical Growth Model

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