IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v27y1994i2p393-407.html
   My bibliography  Save this article

General Equilibrium in a Simple Economy with Imperfect Information

Author

Listed:
  • Colin Read

Abstract

The author determines equilibrium in a simple economy with imperfect information. Each risk-neutral household acts as a firm, making wage offers according to an endogenous wage distribution, and as a laborer, sampling a stochastic number of offers made by other households over its search period. This economy with imperfect information and decentralized production and consumption will not maximize welfare. Policy must be carefully formulated because there are two nontrivial equilibria: an unstable Keynesian underemployment equilibrium with coordination failure resulting in underemployment and reduced search effort and a stable high-effort, low-unemployment equilibrium that is reminiscent of a classical equilibrium with frictional unemployment.

Suggested Citation

  • Colin Read, 1994. "General Equilibrium in a Simple Economy with Imperfect Information," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 393-407, May.
  • Handle: RePEc:cje:issued:v:27:y:1994:i:2:p:393-407
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0008-4085%28199405%2927%3A2%3C393%3AGEIASE%3E2.0.CO%3B2-9
    Download Restriction: only available to JSTOR subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    2. Banerjee, Biswajit, 1983. "The Role of the Informal Sector in the Migration Process: A Test of Probabilistic Migration Models and Labour Market Segmentation for India," Oxford Economic Papers, Oxford University Press, vol. 35(3), pages 399-422, November.
    3. Jonathan Eaton, 1987. "A Dynamic Specific-Factors Model of International Trade," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 325-338.
    4. Braulke, Michael, 1983. "A Note on Kuznets' U," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 135-139, February.
    5. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
    6. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
    7. Robinson, Sherman, 1976. "A Note on the U Hypothesis Relating Income Inequality and Economic Development," American Economic Review, American Economic Association, vol. 66(3), pages 437-440, June.
    8. Moore, Robert E., 1990. "Measuring inequality change in an economy with income growth : Reassessment," Journal of Development Economics, Elsevier, vol. 32(1), pages 205-210, January.
    9. Gary S. Fields, 1979. "A Welfare Economic Approach to Growth and Distribution in the Dual Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 325-353.
    10. Papanek, Gustav F. & Kyn, Oldrich, 1986. "The effect on income distribution of development, the growth rate and economic strategy," Journal of Development Economics, Elsevier, vol. 23(1), pages 55-65, September.
    11. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    12. Knight, J B, 1976. "Explaining Income Distribution in Less Developed Countries: A Framework and an Agenda," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 38(3), pages 161-177, August.
    13. Tidrick, Gene M, 1975. " Wage Spillover and Unemployment in a Wage-Gap Economy: The Jamaican Case," Economic Development and Cultural Change, University of Chicago Press, vol. 23(2), pages 306-324, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:27:y:1994:i:2:p:393-407. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler). General contact details of provider: http://edirc.repec.org/data/ceaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.