Unemployment persistence and loss of productive capacity: A Keynesian approach

Abstract Empirical evidence suggests that the European unemployment problem is somehow connected with a capital shortage. The paper introduces a Keynesian model to deal with this issue. In this model the rate of capacity utilization plays a central role in two simultaneously operating mechanisms thus exhibiting hysteresis: price adjustment and capital accumulation. The implications for employment and unemployment are discussed. It is demonstrated that equilibrium unemployment may be caused by adverse demand shocks.

[1]  A. Barten,et al.  Toward a levels version of the Rotterdam and related demand systems , 1990 .

[2]  F. van der Ploeg,et al.  Conflict over arms accumulation in market and command economies , 1987 .

[3]  Jan R. Magnus,et al.  The exact multi-period mean-square forecast error for the first-order autoregressive model , 1988 .

[4]  Charles Wyplosz,et al.  The Zero Root Problem: A Note on the Dynamic Determination of the Stationary Equilibrium in Linear Models , 1985 .

[5]  F. Palm,et al.  Parameter identification in ARMA-processes in the presence of regular but incomplete sampling. , 1990 .

[6]  F. Ploeg.  Trade unions, investment, and employment , 1987 .

[7]  F. van der Ploeg,et al.  International interdependence and policy coordination in economies with real and nominal wage rigidity , 1987 .

[8]  A. Oswald.  The Economic Theory of Trade Unions: An Introductory Survey , 1985 .

[9]  R. Layard,et al.  WHY DOES UNEMPLOYMENT PERSIST , 1989 .

[10]  E. Damme,et al.  Signalling in a Dynamic Labour Market , 1990 .

[11]  Jan R. Magnus,et al.  Fiscal policy and finite lives in interdependent economies with real and nominal wage rigidity , 1988 .

[12]  J. Benassy,et al.  The economics of market disequilibrium , 1982 .

[13]  E. Damme.  Renegotiation-proof equilibria in repeated prisoners' dilemma , 1989 .

[14]  B. Greenwald,et al.  Financial Market Imperfections and Business Cycles , 1993 .

[15]  J. Sachs.  High Unemployment in Europe: Diagnosis and Policy Implications , 1986 .

[16]  L. Summers.  Should Keynesian Economics Dispense with the Phillips Curve , 1991 .

[17]  The political economy of social security , 1989 .

[18]  Edmond Malinvaud,et al.  The theory of unemployment reconsidered , 1978 .

[19]  Olivier J. Blanchard.  Unemployment: Getting the Questions Right - and Some of the Answers , 1988 .

[20]  Olivier J. Blanchard,et al.  Monopolistic Competition and the Effects of Aggregate Demand , 1987 .

[21]  A. Barten,et al.  Price formation of fish: An application of an inverse demand system , 1989 .

[22]  Jan R. Magnus,et al.  A note on instrumental variables and maximum likelihood estimation procedures , 1986 .

[23]  E. Malinvaud.  Profitability and factor demands under uncertainty , 1989 .

[24]  Tom Wansbeek,et al.  Estimation of the error-components model with incomplete panels , 1989 .

[25]  L. Summers,et al.  Hysteresis and the European Unemployment Problem , 1986, NBER Macroeconomics Annual.

[26]  D. Romer,et al.  Sticky Prices as Coordination Failure , 1987 .

[27]  Jan R. Magnus,et al.  The exact multi-period mean-square forecast error for the first-order autoregressive model , 1988 .

[28]  Thijs ten Raa,et al.  The Choice Of Model In The Construction Of Input-Output Coefficients Matrices , 1990 .

[29]  Joseph E. Stiglitz,et al.  Price Rigidities and Market Structure , 1984 .

[30]  E. Malinvaud.  Profitability and unemployment , 1981 .

[31]  R. Hall.  Macroeconomics: Theory, performance, and policy , 1986 .

[32]  T. Klundert,et al.  On socioeconomic causes of ‘wait unemployment’ , 1990 .

[33]  B. Greenwald,et al.  Imperfect Information, Credit Markets and Unemployment , 1986 .

[34]  M. Burda.  Is there a capital shortage in Europe? , 1988 .

[35]  T. Klundert,et al.  Price inertia in a macroeconomic model of monopolistic competition , 1988 .

[36]  G. V. L. Narasimham,et al.  Econometric analysis for national economic planning , 1971 .

[37]  F. van der Ploeg,et al.  Perfect equilibrium in a model of competitive arms accumulation , 2010 .

[38]  J. Sachs,et al.  Economics of worldwide stagflation , 1986 .

[39]  Richard Layard,et al.  Unemployment in Britain , 1986 .