Document Type
Paper Series
Publication Date
2005
No.
159
Abstract
This paper provides a model of involuntary unemployment by combining the insights of the sticky wage theory and the efficiency wage theory. It implies that employed workers tend to supply more effort in response to economic downturns. So, a negative shock to an economy has intriguing impacts on the unemployment. The model also shows that a negative demand shock may have a relatively small effect on output since changes in work effort serve to partially mitigate the effects of the shock. Moreover, it yields some implications that complement the existing “work-sharing” literature.
Recommended Citation
Fan, C. S. (2005). Sticky wage, efficiency wage, and Keynesian unemployment (CPPS Working Paper Series No.159). Retrieved from Lingnan University website: http://commons.ln.edu.hk/cppswp/74/
Comments
CPPS Working Paper Series No.159 (Sep 05)