Financial shocks, wage-setting and employment
AbstractThe paper investigates the employment effects of changes in interest rate, availability of credit, internal net worth, market power and debt-equity ratio. A model of an oligopolistic risk averse firm is used as an analytical framework, combined with a Nash bargain over wage. The analysis suggests that employment is highly sensitive to changes in financial factors, and that this sensitivity increases with indebtedness. The main reasons for the result are the assumptions of (1) the decisive role of investment in employment determination in long run and (2) credit rationing. The result emphasizes the importance of monetary policy when aggregate employment is concerned.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 6 (1993)
Issue (Month): 1 (Spring)
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Meyer, Bruce D, 1990.
"Unemployment Insurance and Unemployment Spells,"
Econometric Society, vol. 58(4), pages 757-82, July.
- Narendranathan, W & Stewart, Mark B, 1993. "How Does the Benefit Effect Vary as Unemployment Spells Lengthen?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 361-81, Oct.-Dec..
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