Efficiency wages and the business cycle puzzle

The main thrust of this work is to open the Real Business Cycle (RBC) methodology to non-Walrasian considerations and, reciprocally, to submit some non-Walrasian models to the discipline of the RBC approach. In doing so, we provide a first RBC model with involuntary unemployment and a suboptimal equ...

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Bibliographic Details
Published in:European economic review 1990-11, Vol.34 (7), p.1275-1301
Main Authors: Danthine, Jean-Pierre, Donaldson, John B.
Format: Article
Language:English
Subjects:
Business cycles
Comparative studies
Correlation analysis
Economic conditions
Economic models
Economic theory
Efficiency
Labor market
Labour market
Market equilibrium
Real wages
Unemployment
Wages
Wages & salaries
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Summary:The main thrust of this work is to open the Real Business Cycle (RBC) methodology to non-Walrasian considerations and, reciprocally, to submit some non-Walrasian models to the discipline of the RBC approach. In doing so, we provide a first RBC model with involuntary unemployment and a suboptimal equilibrium path. We also demonstrate the promise and difficulty of resolving the business cycle puzzle by appealing to quantity rationing in the labor market.
ISSN:0014-2921
1873-572X
DOI:10.1016/0014-2921(90)90001-F