IS THERE A TRADE-OFF BETWEEN EMPLOYMENT AND GROWTH

This paper investigates how unemployment and the long-run growth rate influence each other in steady state. It builds on Pissarides but Rams ey preferences are introduced, influencing the interest rate. A centra l finding is that there is a trade-off between successful growth and u nemployment if one considers direct changes in the growth rate, but wh en the changes are indirect, what is good for growth is also good for employment. Thus to increase both growth and the employment rate, the policy implication seems to be that one should improve incentives (low er capital tax or unemployment benefits) rather than subsidize R&D inc entives.