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A Simple Model Of Keynesian Unemployment

  • Tetsuya Nakajima

This paper presents a general equilibrium model that extends a static New Keynesian framework to an overlapping generations model. The model shows multiple stationary states, one of which has the following strong Keynesian features: (1) a reduction in wages generates increased unemployment through a decrease in consumption, and (2) the fiscal multiplier is larger than unity and is increasing in the wage share in income. Copyright � 2009 The Author. Journal compilation � 2009 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Metroeconomica.

Volume (Year): 61 (2010)
Issue (Month): 2 (05)
Pages: 239-256

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Handle: RePEc:bla:metroe:v:61:y:2010:i:2:p:239-256
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  1. N. Gregory Mankiw, 1987. "Imperfect Competition and the Keynesian Cross," NBER Working Papers 2386, National Bureau of Economic Research, Inc.
  2. 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.
  3. Holmlund, Bertil, 1998. " Unemployment Insurance in Theory and Practice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 113-41, March.
  4. 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.
  5. 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.
  6. 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.
  7. Alexopoulos, Michelle, 2004. "Unemployment and the business cycle," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 277-298, March.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
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