A Simple Model of Keynesian Unemployment

Tetsuya Nakajima ()

Macroeconomics from EconWPA

Abstract: 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.

Keywords: Unemployment; Keynesian; Efficiency wages (search for similar items in EconPapers)
JEL-codes: E12 E24 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: Written 2005-02-11
Note: Type of Document - pdf; pages: 28. a substantially improved version of ewp-mac/0404039
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