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The Dynamics of Unemployment, Capacity Constraints and Demand Shortages

Author

Listed:
  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

  • Fagnart, Jean-François

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

This paper presents an intertemporal model in which the agents may face different quantity constraints resulting from technological rigidities, microeconomic uncertainty and market segmentation. Its main purpose is to derive the path of the unemployment rate, the rate of capacity utilisation and the proportion of firms reporting demand constrains from a union-firm optimisation programme. The model is calibrated and the impact of different unfavourable shocks is simulated using a new algorithm for solving dynamic non-linear models. The present exercise outlines how cautious the interpretation of business survey indicators should be.

Suggested Citation

  • de la Croix, David & Fagnart, Jean-François, 1994. "The Dynamics of Unemployment, Capacity Constraints and Demand Shortages," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1994013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:1994013
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, pages 97-109.
    2. Roth, Alvin E, 1985. "A Note on Risk Aversion in a Perfect Equilibrium Model of Bargaining," Econometrica, Econometric Society, pages 207-211.
    3. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 99-125.
    4. repec:bla:restud:v:57:y:1990:i:1:p:99-125 is not listed on IDEAS
    5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
    6. Urbain, Jean-Pierre, 1992. "On Weak Exogeneity in Error Correction Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(2), pages 187-207, May.
    7. Bogaert, H. & de Biolley, T. & Verlinden, J., 1991. "L'ajustement des salaires face aux chocs pétroliers et les réponses de la politique économique," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1991008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    9. Hansen, Bruce E., 1992. "Efficient estimation and testing of cointegrating vectors in the presence of deterministic trends," Journal of Econometrics, Elsevier, pages 87-121.
    10. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    11. Alogoskoufis, George & Manning, Alan, 1991. "Tests of alternative wage employment bargaining models with an application to the UK aggregate labour market," European Economic Review, Elsevier, pages 23-37.
    12. Dalmazzo, Alberto, 1992. "Outside options in a bargaining model with decay in the size of the cake," Economics Letters, Elsevier, pages 417-421.
    13. Stephen Nickell & Sushil Wadhwani, 1991. "Employment Determination in British Industry: Investigations Using Micro-Data," Review of Economic Studies, Oxford University Press, pages 955-969.
    14. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
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    16. Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Wiley Blackwell, vol. 4(3), pages 249-273.
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    More about this item

    Keywords

    dynamic contracting model; unemployment; rate of utilisation of capacities; demand shortages; aggregation; putty-clay;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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