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A Neoclassical Model of Unemployment and the Business Cycle


  • Hamilton, James D


This paper investigates a general equilibrium model of unemployment and the business cycle in which specialization of labor plays a key role. A rational expectations equilibrium with ful ly flexible wages and prices can exhibit unemployment in which the ma rginal product of employed workers exceeds the reservation wage of th ose who are without jobs. Workers are unemployed either because they are in the process of relocating for a better job or because they are waiting for conditions in the depressed sector to improve. Moreover, seemingly small disruptions in the supplies of primary commodities s uch as energy could be the source of fluctuations in aggregate employ ment and can exert surprisingly large effects on real output. Copyright 1988 by University of Chicago Press.

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  • Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June.
  • Handle: RePEc:ucp:jpolec:v:96:y:1988:i:3:p:593-617

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    References listed on IDEAS

    1. Sargent, Thomas J, 1973. "Interest Rates and Prices in the Long Run: A Study of the Gibson Paradox," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 385-449, Part II F.
    2. Barsky, Robert B., 1987. "The Fisher hypothesis and the forecastability and persistence of inflation," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 3-24, January.
    3. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    4. Barro, Robert J, 1979. "Money and the Price Level under the Gold Standard," Economic Journal, Royal Economic Society, vol. 89(353), pages 13-33, March.
    5. Michael D. Bordo, 1981. "The classical gold standard: some lessons for today," Review, Federal Reserve Bank of St. Louis, issue May, pages 2-17.
    6. David Levhari & Robert S. Pindyck, 1981. "The Pricing of Durable Exhaustible Resources," The Quarterly Journal of Economics, Oxford University Press, vol. 96(3), pages 365-377.
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