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A Simple Model of Keynesian Unemployment

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  • Tetsuya Nakajima

    (Osaka City University)

Abstract

Constructing a general equilibrium model which compactly incorporates the markets for outputs, labor, money, and equities, we examine equilibrium unemployment. While a mechanism of an efficiency wage brings about nominal wage rigidity, unemployment occurring in our model definitely has Keynesian features. For instance, a reduction in wages rather enhances unemployment through a decrease in consumption. In addition, our paper shows a possibility of Pareto improvement through an increase in unemployment benefits.

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File URL: http://128.118.178.162/eps/mac/papers/0502/0502024.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0502024.

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Length: 28 pages
Date of creation: 11 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0502024

Note: Type of Document - pdf; pages: 28. a substantially improved version of ewp-mac/0404039
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Web page: http://128.118.178.162

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Keywords: Unemployment; Keynesian; Efficiency wages;

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  1. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-41, March.
  2. Robin Boadway & Katherine Cuff & Nicolas Marceau, 2000. "Redistribution and Employment Policies with Endogenous Unemployment," Cahiers de recherche CREFE / CREFE Working Papers 121, CREFE, Université du Québec à Montréal.
  3. Dixon, Huw, 1987. "A Simple Model of Imperfect Competition with Walrasian Features," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 134-60, March.
  4. Molana, Hassan & Moutos, Thomas, 1992. "A Note on Taxation, Imperfect Competition and the Balanced Budget Multiplier," Oxford Economic Papers, Oxford University Press, vol. 44(1), pages 68-74, January.
  5. Mankiw, N. Gregory, 1988. "Imperfect competition and the Keynesian cross," Economics Letters, Elsevier, vol. 26(1), pages 7-13.
  6. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  7. Kahn, Charles & Mookherjee, Dilip, 1988. "A Competitive Efficiency Wage Model with Keynesian Features," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 609-45, November.
  8. Alexopoulos, Michelle, 2004. "Unemployment and the business cycle," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 277-298, March.
  9. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  10. Madden, Paul, 1992. "A Disequilibrium Rational Expectations Model with Walrasian Prices and Involuntary Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 831-44, October.
  11. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
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