A Simple Model of Keynesian Unemployment
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.
|Date of creation:||11 Feb 2005|
|Date of revision:|
|Note:||Type of Document - pdf; pages: 28. a substantially improved version of ewp-mac/0404039|
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