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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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    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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