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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- Goldsmith, Arthur H. & Veum, Jonathan R. & Darity, William Jr., 1997. "Unemployment, joblessness, psychological well-being and self-esteem: Theory and evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 26(2), pages 133-158.
- 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.
- Goldsmith, Arthur H. & Veum, Jonathan R. & Darity, William Jr., 1996. "The psychological impact of unemployment and joblessness," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 25(3), pages 333-358.
- George A. Akerlof & Janet L. Yellen, 1985. "Unemployment Through the Filter of Memory," The Quarterly Journal of Economics, Oxford University Press, vol. 100(3), pages 747-773.
- N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 100(2), pages 529-538.
- Goldsmith, Arthur H. & Veum, Jonathan R. & Darity, William Jr., 1995. "Are being unemployed and being out of the labor force distinct states?: A psychological approach," Journal of Economic Psychology, Elsevier, vol. 16(2), pages 275-295, July.
- Goldsmith, Arthur H. & Darity, William Jr., 1992. "Social psychology, unemployment exposure and equilibrium unemployment," Journal of Economic Psychology, Elsevier, vol. 13(3), pages 449-471, September.
- Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
- 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.
- George W. Stadler, 1994. "Real Business Cycles," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1750-1783, December.
- Goldsmith, Arthur H & Veum, Jonathan R & Darity, William, Jr, 1997. "The Impact of Psychological and Human Capital on Wages," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 815-29, October.
- 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.
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