Abstract
This paper suggests that unemployment is favorable to monopoly rights. Monopoly rights tied to work practices and use of more productive technologies blocking the use of superior technologies result in a low Total Factor Productivity (TFP) and thus low per worker income. Given a high unemployment rate as a signal, households and monopolies recognize that it is difficult to find new jobs. This gives the monopolies extra incentive to protect their vested interests by lobbying government officials to set high barriers to potential entrants with superior technologies. Consequently, inferior technologies have to be continually adopted. In an analysis of 49 countries, three regularities emerge. When other key variables are controlled, the initial unemployment rate is negatively correlated with the subsequent TFP levels, relative real per worker income levels, and real per capita income growth rates.
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