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Imperfect information, credit markets and unemployment

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  • Greenwald, Bruce C.
  • Stiglitz, Joseph E.

Abstract

This paper describes how imperfect information in both capital and labor markets can, in a context of maximizing firms and perfectly flexible prices and wages, give rise to cyclical variations in unemployment whose character closely resembles that of observed business cycles.
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Suggested Citation

  • Greenwald, Bruce C. & Stiglitz, Joseph E., 1987. "Imperfect information, credit markets and unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 444-456.
  • Handle: RePEc:eee:eecrev:v:31:y:1987:i:1-2:p:444-456
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    References listed on IDEAS

    as
    1. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    2. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
    3. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
    4. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
    5. Stiglitz, Joseph E, 1985. "Equilibrium Wage Distribution," Economic Journal, Royal Economic Society, vol. 95(379), pages 595-618, September.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984. "Informational Imperfections in the Capital Market and Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 74(2), pages 194-199, May.
    8. Grossman, Sanford J & Hart, Oliver D & Maskin, Eric S, 1983. "Unemployment with Observable Aggregate Shocks," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 907-928, December.
    9. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
    10. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    11. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
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    Citations

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    Cited by:

    1. Jürgen Antony & Torben Klarl & Alfred Maußner, 2012. "Firm heterogeneity, credit constraints, and endogenous growth," Journal of Economics, Springer, vol. 105(3), pages 199-224, April.
    2. Sylvain Chabe-Ferret & Julien Gourdon & Mohamed Ali Marouani & Tancrède Voituriez, 2007. "Trade-Induced Changes in Economic Inequality: Assessment Issues and Policy Implications for Developing Countries," Working Papers DT/2007/11, DIAL (Développement, Institutions et Mondialisation).
    3. Joydeep Bhattacharya & Shankha Chakraborty, 2005. "What do information frictions do?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 651-675, October.
    4. Rafael Gomez & David K. Foot, 2003. "Age Structure, Income Distribution and Economic Growth," Canadian Public Policy, University of Toronto Press, vol. 29(s1), pages 141-162, January.
    5. repec:dau:papers:123456789/4331 is not listed on IDEAS
    6. Alho, Kari, . "Analysis of Financial Markets and Central Bank Policy in the Flow-of-Funds Framework. An Application to the Case of Finland," ETLA A, The Research Institute of the Finnish Economy, number 12.
    7. Gerhard Clemenz & Mona Ritthaler, 1992. "Credit markets with asymmetric information : a survey," Finnish Economic Papers, Finnish Economic Association, vol. 5(1), pages 12-26, Spring.
    8. Amano, Masanori, 1999. "Credit rationing of a Bayesian bank with simple screening technologies," Japan and the World Economy, Elsevier, vol. 11(4), pages 545-556, December.
    9. Greenwald, Bruce C. & Kohn, Meir & Stiglitz, Joseph E., 1990. "Financial market imperfections and productivity growth," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 321-345, June.
    10. Arnold, Lutz G, 2002. " Financial Market Imperfections, Labor Market Imperfections and Business Cycles," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 105-124.
    11. Dal Bianco, Silvia & Bruno, Randolph L. & Signorelli, Marcello, 2015. "The joint impact of labour policies and the “Great Recession” on unemployment in Europe," Economic Systems, Elsevier, vol. 39(1), pages 3-26.
    12. Boustanifar, Hamid, 2014. "Finance and employment: Evidence from U.S. banking reforms," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 343-354.

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