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Neo-classical Labour Market Dynamics and Wage Expectations: Chaos and the "Resurrection" of the Phillips Curve

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  • Luciano FANTI

Abstract

In this paper we develop a simple model of the labour market in the neoclassical framework. According to the mainstream literature, dating back to, e.g., Friedman (1968) and Phelps (1968), only temporary deviations from the natural rate of employment may take place in the "expectations augmented" neoclassical labour market. On the contrary we are capable to show that not only temporary but long term regular fluctuations and chaotic behaviour of wages and employment emerge as a robust finding when firms and individuals have uniform wage expectations. This suggests at least one noteworthy consideration: a 'reminiscence' of the long run Phillips curve may emerge in a neoclassical labour market context, by providing a new perspective to the long lasting controversial issue of the existence of the Phillips Curve.

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Bibliographic Info

Article provided by SIE - Societa' Italiana degli Economisti (I) in its journal Rivista Italiana degli Economisti.

Volume (Year): 11 (2006)
Issue (Month): 2 (August)
Pages: 217-240

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Handle: RePEc:rie:review:v:11:y:2006:i:2:n:3

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Related research

Keywords: Phillips curve; business cycles; chaos; neoclassical labour market; wage expectations;

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