Rigidities and full employment

Fernando Antonio Noriega Ureña and Daniel Velázquez Orihuela
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Fernando Antonio Noriega Ureña: Universidad Autónoma Metropolitana, Unidad Azcapotzalco
Daniel Velázquez Orihuela: Universidad Autónoma del Estado de Hidalgo

Revista de Economía Política de Buenos Aires, 2010, issue 7-8, 145-177

Abstract: It is axiomatically shown in this paper that neoclassical theory does not admit any possibility of disequilibrium. If agents while calculating their supply and demand plans take into account the stickiness in the prices vector, the effect of it is annulled, and the economy -eventually not competitive due to the stickinessfunctions as if it was competitive at all. Full employment equilibrium becomes a result even under sticky wages, which implies that in the neoclassical framework it is not possible to explain involuntary unemployment, not even under the assumption of exogenous stickiness.

Keywords: Rigidities; full employment (search for similar items in EconPapers)
Date: 2010
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