Unemployment and indeterminacy |
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Authors: | Tomoyuki Nakajima |
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Affiliation: | Institute of Economic Research, Kyoto University, Kyoto 606-8501, Japan |
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Abstract: | Using an efficiency-wage model, we examine the relationship between indeterminacy and unemployment insurance. It is shown that the less unemployment insurance is, the more likely equilibrium is to be indeterminate. Equilibrium can be indeterminate even without externalities or increasing returns, which makes a sharp contrast to the recent literature on indeterminacy. Our result is based on the fact that the no-shirking condition with marginal utility of wealth kept constant is downward sloping when income insurance is not perfect. |
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Keywords: | E10 E24 E32 J41 |
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