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A Simple Model of Keynesian Unemployment

  • Tetsuya Nakajima

    (Osaka City University)

Constructing a general equilibrium model which compactly incorporates the markets for outputs, labor, money, and equities, we examine equilibrium unemployment. While a mechanism of an efficiency wage brings about nominal wage rigidity, unemployment occurring in our model definitely has Keynesian features. For instance, a reduction in wages rather enhances unemployment through a decrease in consumption. In addition, our paper shows a possibility of Pareto improvement through an increase in unemployment benefits.

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File URL: http://econwpa.repec.org/eps/mac/papers/0502/0502024.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 0502024.

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Length: 28 pages
Date of creation: 11 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0502024
Note: Type of Document - pdf; pages: 28. a substantially improved version of ewp-mac/0404039
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Holmlund, Bertil, 1997. "Unemployment Insurance in Theory and Practice," Working Paper Series 1997:25, Uppsala University, Department of Economics.
  2. Boadway, Robin & Cuff, Katherine & Marceau, Nicolas, 2003. "Redistribution and employment policies with endogenous unemployment," Journal of Public Economics, Elsevier, vol. 87(11), pages 2407-2430, October.
  3. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  4. Dixon, Huw, 1987. "A Simple Model of Imperfect Competition with Walrasian Features," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 134-60, March.
  5. Kahn, Charles & Mookherjee, Dilip, 1988. "A Competitive Efficiency Wage Model with Keynesian Features," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 609-45, November.
  6. Madden, Paul, 1992. "A Disequilibrium Rational Expectations Model with Walrasian Prices and Involuntary Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 831-44, October.
  7. Hassan Molana & Thomas Moutos, 1991. "A Note on Taxation, Imperfect Competition and the Balanced Budget Multiplier," Working Papers Series 91/4, University of Stirling, Division of Economics.
  8. N. Gregory Mankiw, 1987. "Imperfect Competition and the Keynesian Cross," NBER Working Papers 2386, National Bureau of Economic Research, Inc.
  9. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  10. Alexopoulos, Michelle, 2004. "Unemployment and the business cycle," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 277-298, March.
  11. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
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