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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. DREZE, Jacques, 1999. "On the macroeconomics of uncertainty and incomplete markets," CORE Discussion Papers 1999064, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  2. Michel, DE VROEY, 2005. "Involuntary Unemployment : the Elusive Quest for a Theory," Discussion Papers (ECON - Département des Sciences Economiques) 2005004, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  3. Olivier SCAILLET, 2001. "Density Estimation Using Inverse and Reciprocal Inverse Guassian Kernels," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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  4. 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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  5. DREZE, Jacques H. & HERINGS, P. Jean-Jacques, 1998. "Continua of underemployment equilibria," CORE Discussion Papers 1998045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
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  6. 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!]
  7. Michel, DE VROEY, 2004. "Have the early coordination failures models achieved KeynesÕs programme ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  8. 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)
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  9. Jacques H.DREZE, 2001. "On the Macroeconomics of Uncertainty and Incomplete Markets," Discussion Papers (REL - Recherches Economiques de Louvain) 2001011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  10. Seonghwan Oh & Michael Waldman, 1989. "Keynesian Coordination Failure and Persistence," UCLA Economics Working Papers 570, UCLA Department of Economics. [Downloadable!]
  11. 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!]
  12. 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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  13. Shadman-Mehta, Fatemeh & Sneessens, Henri R., 1998. "Demand-Supply Interactions and Unemployment Dynamics: Can there be Path Dependency ? The Case of Belgium, 1955-1994," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  14. Maarten C.W. Janssen, 2006. "Microfoundations," Tinbergen Institute Discussion Papers 06-041/1, Tinbergen Institute. [Downloadable!]
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