The Relationship between Output and Unemployment with Efficiency Wages
AbstractWe construct a stylised model of the supply side with goods and labour market imperfections to show that an economy can rationally operate at a low-effort state in which the relationship between output and unemployment is positive. We examine data from the G7 countries over 1960-2001 and find that only German data strongly favour a persistent negative relationship between the level of output and rate of unemployment. The consequence of this is that circumstances exist in which market imperfections could pose serious obstacles to the smooth working of expansionary and/or stabilisation policies and a positive demand shock might have adverse effects on employment. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2007.
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Bibliographic InfoArticle provided by Verein für Socialpolitik in its journal German Economic Review.
Volume (Year): 8 (2007)
Issue (Month): (November)
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Other versions of this item:
- Jim Malley & Hassan Molana, 2006. " The Relationship between Output and Unemployment with Efficiency Wages," CDMA Conference Paper Series 0607, Centre for Dynamic Macroeconomic Analysis.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
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