 Neo-classical labour market dynamics and uniform expectations: chaos and the "resurrection" of the Phillips CurveDiscussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy Abstract: In this paper we develop a simple model of the labour market in the neoclassical framework dating back to Friedman (1968) and Phelps (1968), among others. According to the existing literature wage expectations should be formed in a different way by firms and individuals in order temporary deviations from natural rate of employment to take place in the "expectations augmented" neoclassical labour market. On the contrary we are capable to show that not only temporary but long term regular fluctuations and chaotic behaviour of wages and employment emerge as a robust finding also when firms and individuals have uniform expectations. This suggests at least two noteworthy considerations: 1) the Walrasian equilibrium dynamics of the "expectations augmented" neoclassical labour market can cause long term unemployment; 2) a 'reminiscence' of the Phillips curve emerges in a neoclassical labour market context, by providing a new perspective to the long lasting controversial issue of the existence of the Phillips Curve. Keywords: neoclassical labour market; wage expectations; Phillips curve; business cycles; chaos (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2004/34 Access Statistics for this paper More papers in Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy Contact information at EDIRC. |
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