Keynesian involuntary unemployment and sticky nominal wages

Article Abstract:

A model is presented in which intertemporal optimization decisions of profit maximizing monopsonistic firms and completely rational and informed workers in an uncertain context result in sticky nominal wages and Keynesian involuntary unemployment. Uncertainty related to the business cycle and its effect on product price creates disequilibrium wages and pinpoints the labor demand function in contracts and labor supply in expansions. Significant empirical support is found for a negative relationship between real wages and employment during contractions and a positive relationship during expansions.

Keynesian economics

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Nominal rigidities in wage setting by rational trade unions

Article Abstract:

A model of wage setting by a labor union that is assumed to act rationally and without intentionally indexing wages to a preset monetary level is presented. The indexation can be assumed to be linked to current price levels of goods and services. Using the model results only in nominal rigidities but not full real rigidities, the latter condition arising if the trade union had not acted in a rational manner. The nominal rigidities exist because of the impossibility of determining all variables needed for a perfectly rational decision.

Economic policy, Labor unions

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Wages and unemployment in an urban African labour market

Article Abstract:

A study was conducted to ascertain if urban African labor markets display a wage curve like those found in the US, the UK, Canada and other developed countries. Analysis of household level data from Cote d'Ivoire reveals that urban wages are depressed by higher levels of unemployment. The result is consistent with the wage-determination model formulated by Shapiro and Stiglitz (1984) and Blanchflower and Oswald (1995), although it does not support assumptions that urban wages are not variant to unemployment.

Economic aspects, Urban economics, Cote d'Ivoire

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