Understanding the Great Changes: A Comment
8 Pages Posted: 23 Jan 2013
Date Written: January 23, 2013
Phelps provides a theoretical explanation of why rapid productivity growth, good employment performance, and current account deficits tend to go together. There are two strands to it. One is an application of Phelps’s well-known theory of the firm’s offer of employment as an investment decision. In the present context, it explains why an increase in the rate of productivity growth relative to the world interest rate raises the demand price for labor and thus employment.
This paper is a comment on Understanding the Great Changes in the World: Gaining Ground and Losing Ground Since World War II by Edmund S. Phelps which can be found at: http://ssrn.com/abstract=2205843.
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