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An Equilibrium Model with Involuntary Unemployment at Flexible, Competitive Prices and Wages

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Author Info
Roberts, John
Abstract

This paper presents a general-equilibrium model in which all prices and quantities transacted are the direct choices of econom ic agents: there is no Walrasian auctioneer. Multiple subgame perfect equilibria exist with prices and wages at their Walrasian levels. Among the equilibrium allocations are the Walrasian ones, but there a re also outcomes in which price- and wage-taking workers are rationed in the labor market and are unable to sell all the labor they want a t the prevailing wage. This involuntary unemployment results from sel f-fulfilling expectations of inadequate excess demand as in some inte rpretations of Keynes's ideas. Copyright 1987 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 77 (1987)
Issue (Month): 5 (December)
Pages: 856-74
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Handle: RePEc:aea:aecrev:v:77:y:1987:i:5:p:856-74

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  1. Gaël Giraud & Céline Rochon, 2008. "Natural rate of unemployment and efficiency: A dynamic analysis with flexible prices and increasing returns," OFRC Working Papers Series 2008fe02, Oxford Financial Research Centre. [Downloadable!]
  2. Michel, DE VROEY, 2005. "Involuntary Unemployment : the Elusive Quest for a Theory," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2005004, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  3. Herings, P.J.J. & Dreze, J.H., 1998. "Continua of underemployment equilibria," Discussion Paper 5, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  4. Michel, DE VROEY, 2004. "Have the early coordination failures models achieved Keynes’s programme ?," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2004019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  5. Olivier SCAILLET, 2001. "Density Estimation Using Inverse and Reciprocal Inverse Guassian Kernels," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2001017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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  6. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1989. "Building Blocks of Market Clearing Business Cycle Models," NBER Working Papers 3004, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Seonghwan Oh & Michael Waldman, 1989. "Keynesian Coordination Failure and Persistence," UCLA Economics Working Papers 570, UCLA Department of Economics. [Downloadable!]
  8. Citanna,Alessandro & Cres,Herve & Dreze,Jacques & Herings,P. Jean-Jacques & Villanacci,Antonio, 2001. "Underemployment of Resources and Self-fulfilling Beliefs: Non-Walrasian Allocations at Walrasian Prices," Research Memoranda 003, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
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  9. Herings,P. Jean-Jacques, 2001. "Coordinating Thoughts on Coordination Failures," Research Memoranda 018, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  10. L Kaas & P Madden, 2002. "Equilibrium Involuntary Unemployment Under Oligempory," Centre for Growth and Business Cycle Research Discussion Paper Series 21, Economics, The Univeristy of Manchester. [Downloadable!]
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  11. Shadman-Mehta, Fatemeh & Sneessens, Henri R., 1998. "Demand-Supply Interactions and Unemployment Dynamics: Can there be Path Dependency ? The Case of Belgium, 1955-1994," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 1998017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  12. Maarten C.W. Janssen, 2006. "Microfoundations," Tinbergen Institute Discussion Papers 06-041/1, Tinbergen Institute. [Downloadable!]
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