Equilibrium unemployment theory Christopher A. Pissarides
Publisher: MIT

His finding that the only equilibrium price was the monopoly became known as the Diamond paradox. Equilibrium Unemployment Theory, Cambridge: MIT. This paper develops a political economy model of multiple unemployment equilibria to provide a theory of an endogenous natural rate of unemployment. The latter is entirely unexplained by the benchmark homogeneous-agent model of equilibrium unemployment theory. Figure 1: A Supply and Demand Model for Labor. I argue that the unemployment rate returns to a level that depends on wealth and, just as there are many equilibrium unemployment rates, so there are many equilibrium values for the prices of assets. Wage rigidity is thus introduced as an ad hoc assumption to explain how an unemployment “equilibrium” is possible. €I don't really buy the assumptions about rationality and markets that are embedded in many modern theoretical models, my own included, and I often turn to Old Keynesian ideas, but I see the usefulness of such models as a way to think through some issues carefully – an attitude that is actually widely shared Hicks argued that it was possible for the economy to be in an equilibrium (a word I'll be labouring in this post) in which there was involuntary unemployment. In a smoothly functioning < Figure 1: A Supply and Demand Model for Labor. The Classical Theory of Unemployment. Schweitzer, Mark, and Jennifer Ransom, 1999. We consider the dynamic relationship between product market entry regulation and equilibrium unemployment. Equilibrium Unemployment Theory. 1994 Report and Financial Statements.