Wages and Unemployment: A Study in Non-Walrasian Macroeconomics
This book is concerned with the problem of wage rigidities in macroeconomic theory, and their implications for public policy. It offers an analysis of the microeconomic foundations of rigid wages, considering their implications for normative economics, and their role in explaining involuntary unemployment. The initial chapters examine short-run macroeconomic equilibrium with nominal rigidities within the framework of fixed-price temporary equilibria. This is followed by an overview and assessment of the main microeconomic mechanisms likely to account for real wage rigidity. In this context new findings concerning microeconomic mechanisms likely to account for real wage rigidity, including implicit contract theory, union behaviour and efficiency wage models are reported. The effect of efficiency wages on macroeconomic fluctuations is also considered. Finally an analysis of the important public policy issues raised in the book is provided.
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1 Price rigidities and temporary equilibrium
2 Wage rigidity and shortrun macroeconomic equilibrium
3 Real wages and the inflationunemployment dilemma
4 External constraint oil shock and economic policy
5 Implicit contracts and unions
6 Introduction to efficiency wage models
adverse selection agents assume asymmetric information behaviour classical unemployment competitive condition consider consumer corresponds cost current period current price curve decrease deﬁned deﬁnition demand for labour disequilibrium regimes domestic economy effective demand eﬂective eﬂiciency wage employment level equal equation excess demand expected utility ﬁgure ﬁrm ﬁrm’s ﬁrst ﬁx-price equilibrium ﬁxed ﬂuctuations full-employment hired households hypothesis implicit contract implies incentive compatible income increase indexation individuals intertemporal involuntary unemployment Keynesian unemployment labour contracts labour market labour supply macroeconomic Maximize money balances money holdings nominal rigidities notional supply obtain oil shock opportunity cost optimal contract output price vector primary sector production proﬁt proﬁtable proposition public consumption quantity constraints rationing scheme real wage rate real wage rigidity represented repressed inﬂation respect rise risk-neutral satisﬁes shirk short run trade transactions transitory unemployed unemployment beneﬁt unemployment prevails unemployment regime union utility function variations Walrasian equilibrium workers