| Abstract: | This paper examines the role of aggregate demand policy affecting unemployment under a model of dual labor markets. Recently, some papers have considered the sources of unemployment in OECD countries and have stressed the role of aggregate demand policy in reducing it. However, there exists the argument that aggregate demand policy may have an adverse effect on unemployment. Therefore, in this paper, we will consider in what situations aggregate demand policy has such an effect on unemployment, and propose an analysis of its microfoundation. |
