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Sticky Wage, Efficiency Wage And Keynesian Unemployment

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  • C. Simon Fan

Abstract

. This paper provides a model of involuntary unemployment by combining the insights of the sticky wage theory and the efficiency wage theory. It implies that employed workers tend to supply more effort in response to economic downturns. Thus, a negative shock to an economy has intriguing impacts on the unemployment. The model also shows that a negative demand shock may have a relatively small effect on output since changes in work effort serve to partially mitigate the effects of the shock. Moreover, it yields some implications that complement the existing ‘work sharing’ literature.

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  • C. Simon Fan, 2007. "Sticky Wage, Efficiency Wage And Keynesian Unemployment," Pacific Economic Review, Wiley Blackwell, vol. 12(2), pages 213-224, May.
    • Handle: RePEc:bla:pacecr:v:12:y:2007:i:2:p:213-224
    DOI: 10.1111/j.1468-0106.2007.00350.x
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    Cited by:

    1. Vaona, Andrea, 2011. "Four variations on fair wages and the Phillips curve," Kiel Working Papers 1713, Kiel Institute for the World Economy (IfW Kiel).

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