Keynesian Involuntary Unemployment and Sticky Nominal Wages

James Holmes and Patricia Hutton

Economic Journal, 1996, vol. 106, issue 439, 1564-85

Abstract: This paper presents a model in which sticky nominal wages and Keynesian involuntary unemployment result as a consequence of the intertemporal optimization decisions of profit-maximizing monopsonistic firms and fully rational and informed workers in an uncertain environment. Uncertainty associated with the business cycle and its impact on product price generates disequilibrium wages and identifies the labor demand function in contractions and the supply of labor in expansions. The theoretical prediction of a negative relationship between real wages and employment during contractions and a positive relationship during expansions is strongly supported by the empirical evidence presented. Copyright 1996 by Royal Economic Society.

Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://links.jstor.org/sici?sici=0013-0133%2819961 ... 0.CO%3B2-Q&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecj:econjl:v:106:y:1996:i:439:p:1564-85

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133

Access Statistics for this article

Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().