Key concepts (12)
Chapter 16
Chapter 16
Adjustment gap
Stock
Flow
Taylorism
Bargaining power
Concave function
Procyclical
Labour productivity
Countercyclical
Capital intensive
Acyclical
Capital goods
Co-insurance
Creative destruction
Beveridge curve
Innovation rents
Employment protection legislation
Diffusion gap
Short run (model)
The long-run price setting curve
Long run (model)
Price-setting curve
Medium run (model)
Wage-setting curve
Inclusive trade union
Expropriation risk
Gross unemployment benefit replacement rate
Labour market matching
Industry
Profits in excess of the opportunity cost of capital that an innovator gets by introducing a new technology, organizational form, or marketing strategy. Also known as: Schumpeterian rents.
Joseph Schumpeter’s name for the process by which old technologies and the firms that do not adapt are swept away by the new, because they cannot compete in the market. In his view, the failure of unprofitable firms is creative because it releases labour and capital goods for use in new combinations.
The equipment, buildings, and other durable inputs used in producing goods and services, including where applicable any patents or other intellectual property that is used. Raw materials used in production are referred to as intermediate inputs.
Making greater use of capital goods (for example machinery and equipment) as compared with labour and other inputs.
Total output divided by the number of hours or some other measure of labour input.
Innovation in management that seeks to reduce labour costs, for example by dividing skilled jobs into separate less-skilled tasks so as to lower wages.
A function of two variables for which the line segment between any two points on the function lies entirely below the curve representing the function (the function is convex when the line segment lies above the function).
A quantity measured at a point in time. Its units do not depend on time.
A quantity measured per unit of time, such as annual income or hourly wage.
The extent of a person’s advantage in securing a larger share of the economic rents made possible by an interaction.
Tending to move in the same direction as aggregate output and employment over the business cycle.
Tending to move in the opposite direction to aggregate output and employment over the business cycle.
No tendency to move either in the same or opposite direction to aggregate output and employment over the business cycle.
A means of pooling savings across households in order for a household to be able to maintain consumption when it experiences a temporary fall in income or the need for greater expenditure.
The inverse relationship between the unemployment rate and the job vacancy rate (each expressed as a fraction of the labour force). Named after the British economist of the same name.
The way in which employers looking for additional employees (that is, with vacancies) meet people seeking a new job.
The probability that an asset will be taken from its owner by the government or some other actor.
The curve that gives the real wage necessary at each level of economy-wide employment to provide workers with incentives to work hard and well.
The curve that gives the real wage paid when firms choose their profit-maximizing price.
The lag between the first introduction of an innovation and its general use
The lag between some outside change in labour market conditions and the movement of the economy to the neighbourhood of the new equilibrium.
Laws making job dismissal more costly (or impossible) for employers.
The term does not refer to a period of time, but instead to what is exogenous: prices, wages, the capital stock, technology, institutions.
The term does not refer to a period of time, but instead to what is exogenous. A long-run cost curve, for example, refers to costs when the firm can fully adjust all of the inputs including its capital goods; but technology and the economy’s institutions are exogenous.
The term does not refer to a period of time, but instead to what is exogenous. In this case capital stock, technology, and institutions are exogenous. Output, employment, prices, and wages are endogenous.
A union, representing many firms and sectors, which takes into account the consequences of wage increases for job creation in the entire economy in the long run.
The proportion of a worker’s previous gross (pre-tax) wage that is received (gross of taxation) when unemployed.
Goods-producing business activity: agriculture, mining, manufacturing, and construction. Manufacturing is the most important component.
Once we know the equilibrium markup μ* and the productivity of labour λ, we know the real wage w is given by:
𝑤=𝜆(1−𝜇∗)
w is the output per worker that is not claimed by the employer through the markup.