Classical and Keynesian unemployment in Austria

The labor market in a macroeconometric model of Austria is used to determine the natural unemployment rate, full-employment (F.E.) output, and the F.E. real wage for 1966–92. Gaps between actual and F.E. variables are examined analytically and historically. Observed unemployment is decomposed into natural, hidden, classical, and Keynesian components. Classical unemployment is associated with the real wage gap, while Keynesian unemployment depends on the output gap. A rise in the natural rate is found to account for almost all of the increase in unemployment between 1966–74 and 1975–81, but an increase in Keynesian unemployment is the major factor in the rise of unemployment between 1975–81 and 1982–92. A fiscal shock to the complete model is found to increase real GDP for a year or two, reducing Keynesian unemployment without an appreciable rise in classical unemployment; the wage gap is eventually increased, however, producing a modest rise in classical unemployment.A lengthier version of this paper was presented at the Annual Meeting of the Austrian Economic Association, Graz, April 14–16, 1993. The generous finacial support of the Jubiläumsfonds of the Austrian National Bank for the research of which this paper is a part is gratefully acknowledged.     

On the existence of involuntary unemployment equilibria

Conclusion We have proved the existence of equilibria implying involuntary unemployment of labour in non-competitive economies with fixed wage rate. We notice that model (II) and its extensions have not been presented as aninterpretation of Keynes' theory. We may define them as Keynesian models only in the sense that they admit involuntary unemployment equilibrium, which concept is basic to Keynes' theory. In any case, we think that these models are a first step in the development of more realistic microeconomic foundations for short-run macroeconomic theory.A first draft of this paper was presented in December 1972 at the Institute of Political Economy, Faculty of Economics and Banking, Siena University.     

Uncertain vacancies and unemployment equilibria

The paper develops a dynamic implicit contracts model to consider the rationale for rejections of qualified applicants in the search process and to explore the implications for unemployment rates under equilibrium in the labor market. The implications are similar to traditional search models, although the effects of stochastic output prices upon equilibrium unemployment can be directly determined. A nearly invariant natural rate result pertains. A stochastic sales-rations variant of the model leads to equilibrium unemployment rates that depend upon both neoclassical and Keynesian factors.     

Dynamic equilibria with unemployment due to undernourishment

Summary We provide characterization and stability results for the stationary equilibria of a competitive infinite-horizon model that incorporates the nutritional requirements of physical labor. We find that for many aggregate land stocks, there is a large continuum of stationary equilibrium unemployment rates. Since unemployment can be seen to stem from inequality in the initial distribution of land ownership, we suggest that certain land reforms can reduce unemployment.Many of our results were developed while Streufert visited the Indian Statistical Institute. Ray is grateful for financial support from the Warshow Endowment of Cornell University, and Streufert thanks the Institute for Research on Poverty and the Graduate School, both at the University of Wisconsin-Madison. We are also thankful for the useful comments of an editor, a referee, and seminar participants at Wisconsin, Yale, the Federal Reserve Bank of Minneapolis, and the Midwest Mathematical Economics Conference.     

A note on monopolistic quantity rationing

It is shown that under incomplete information it may be optimal for a monopolist to ration a single price taker in addition to setting prices, which is in contrast to the case of complete information. As a byproduct it is shown that the star-shaped hull of the offer curve of a price taker exactly consists of the points that can be supported as Drèze-optima.     

A note on decentralizability in consumer demand models with quantity rationing

It is shown that in a context of quantity rationing, it is not always possible to decentralize the consumer's intertemporal behavior in a sequence of atemporal, static optimization programs. Whether or not decentralizability holds crucially depends on the perceived rationing scheme.     

A note on Keynesian unemployment as a worker discipline device

Keynesian sales constraints are introduced into a model with endogeneous wages and involuntary equilibrium umemployment. The result is a lower real wage and a higher unemployment rate.     

Dynamic aspects in a temporary equilibrium of international trade with quantity rationing

The dynamics of a small open economy are analyzed in a context where economic agents have uncertain expectations about future market dates such as prices and wages or quantity constraints. The dynamic adjustment process is shown to be a stable one, and conditions are discussed under which exogeneous shocks will alter the asymptotic equilibrium of the economy. The economic system in general does not approach the long-run equilibrium monotonically, i.e. the adjustment process has a cyclical pattern.     

Keynesian unemployment as a nash equilibrium with endogenous wage/price setting: An example

A simple 3 good, 1 consumer, 1 firm model of fixed price, quantity constrained equilibrium is developed. A game is then defined on the set of (globally unique) equilibria. The consumer sets the money wage, the firm sets the money price of output (money is numeraire). Nash solutions of the game exist and may involve Keynesian unemployment but never involve Classical unemployment or Repressed inflation.     

Keynesian and monetarist models of unemployment and inflation: A simulation study for Austria

Zusammenfassung In dieser Arbeit wird versucht, durch Simulationen makroökonomischer Modelle für Österreich Aufschluß über die Erklärungskraft monetaristischer und keynesianischer Ansätze zu gewinnen. Zu diesem Zweck werden mit einer gemeinsamen Datenbasis über eine gemeinsame Schätzperiode (1957 bis 1982) drei monetaristische Modelle und ein keynesianisches Modell geschätzt, die möglichst viele gemeinsame Elemente enthalten, zugleich aber die wesentlichen theoretischen Unterschiede (insbesondere bezüglich struktureller Modelleigenschaften) zum Ausdruck bringen sollen. Untersucht werden ein von Stein vorgeschlagenes monetaristisches Modell und zwei Modelle, die die Hypothese der natürlichen Arbeitslosenrate enthalten, wobei das eine auf der Annahme adaptiver und das andere, das weitgehend einer Spezifikation von Sargent folgt, auf jener rationaler Erwartungen (also auf der Neuen Klassischen Makroökonomik) beruht; daneben wird ein keynesianisches Modell geschätzt, in dem die Arbeitslosenrate durch die gesamtwirtschaftliche Nachfrage und die Inflationsrate durch Kostenfaktoren und einen auch langfristig existierenden Phillips-Kurven-trade-off erklärt wird. Alle vier Modelle werden über die Schätzperiode mit den historischen Werten der jeweiligen exogenen Variablen simuliert; als Grundlage für eine Bewertung der Modelle dienen dabei Vergleiche der durch diese Simulation gewonnenen Schätzwerte für Arbeitslosenrate und Inflationsrate mit deren historischen Werten. Fehler- und Prädiktoranalysen zeigen, daß das keynesianische Modell den monetaristischen in bezug auf die meisten verwendeten Kriterien überlegen ist. Daher wird vermutet, daß die derzeit vorliegenden monetaristischen Ansätze weniger zur Erklärung der gesamtwirtschaftlichen Entwicklungen Österreichs und der Zusammenhänge zwischen den wichtigsten Aggregaten beitragen können als keynesianische Ansätze.

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For many valuable comments and suggestions for improvement I am indebted to the anonymous referees of this journal and to A. Wörgötter. Any remaining shortcomings are my own responsibility.     

Oscillations between repressed inflation and Keynesian equilibria due to inertia in decision making

In the framework of a rationed equilibrium economy as introduced by Malinvaud, the paper studies the long term evolution of the economy around the Repressed inflation—Keynesian boundary, introducing timelags in agents' response to changes in prices and wages. Depending on the distribution of timelags we show that the economy exhibits either decreasing oscillations around the boundary, eventually converging to zero, or (semi-) stable steady oscillations between the two regions. The obtained results therefore clarify the validity of the claim that a basic feature of modern economies is the cycling motion between Repressed inflation and Keynesian equilibria.     

On optimal unemployment

Some unemployment may be optimal in all states of nature for certain production and utility parameters and firm-provided insurance. For other specifications, uniformly varying hours for all workers is optimal.