Competitive Wage Cycles with Imperfect Output Market Competition
We consider a model of a sector in which the same set of oligopolistic firms faces a common labour supply constraint. The wage is given in the short run, adjusting competitively in the longer run. When the costs of job creation are low relative to the degree of output market power, there exists no wage that clears the labour market in the short run, and at some wages there are two equilibria, one with involuntary unemployment and one with unfilled vacancies. The competitive wage dynamics produces a cycle with persistent labour market disequilibrium and recurrent periods of involuntary unemployment.
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- Silvestre, Joaquim, 1990.
"There May Be Unemployment When the Labour Market Is Competitive and the Output Market Is Not,"
Royal Economic Society, vol. 100(402), pages 899-913, September.
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89-18, University of Copenhagen. Department of Economics, revised Oct 1989.
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- Oliver Hart, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, Oxford University Press, vol. 97(1), pages 109-138.
- Dehez, Pierre, 1985. "Monopolistic equilibrium and involuntary unemployment," Journal of Economic Theory, Elsevier, vol. 36(1), pages 160-165, June.
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