The Struggle for Rents in a Schumpterian Economy

This paper develops a two-sector endogenous growth model with a dual labour market. Trade unions strive for the extraction of as high a rent as possible from the growth generating imperfectly competitive primary sector. This union behaviour results in a non-competitive wage differential between the primary and secondary (perfectly competitive) sector. The consequence of this distortion is the coming about of wait unemployment, i.e., unemployed queuing for high-paid jobs. Employment and growth are negatively dependent on the relative strength of the union. An increase in concentration in the high-tech sector is good for growth and employment.