Social Psychology, Unemployment and Macroeconomics
In a conventional macroeconomic model, following a policy change, as nominal wages adjust the economy returns to its original real levels of employment, output, and unemployment. This description of events ignores the social psychological consequences of exposure to unemployment. On theoretical grounds, unemployment is expected to damage psychological health, which in turn harms personal productivity. Empirical work supports both of these propositions. This paper presents a 'behavioral' macroeconomic model that accounts for elements of simultaneity between employment outcomes and psychological well-being. Implications of this model for the 'natural' rate hypothesis, the concept of full employment, and unemployment hysteresis are explored.
Volume (Year): 10 (1996)
Issue (Month): 1 (Winter)
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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.:
- William F. Lott & Stephen M. Miller, 1982. "Employers' and Workers' Inflation Expectations: Prediction Accuracy and the Natural-Rate Hypothesis," Eastern Economic Journal, Eastern Economic Association, vol. 8(4), pages 283-288, Oct-Dec.
- George W. Stadler, 1994. "Real Business Cycles," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1750-1783, December.
- Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
- William Darity, Jr. & Arthur H. Goldsmith, 1993. "Unemployment, Social Psychology, and Unemployment Hysteresis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 16(1), pages 55-71, October.
- Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
- Akerlof, George A & Yellen, Janet L, 1985. "Unemployment through the Filter of Memory," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 747-73, August.
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