Underemployment Equilibria: Essays in Theory, Econometrics by Jacques Drèze

By Jacques Drèze

This booklet is a range of Jacques Drèze's paintings during the last ten years at the themes of stagflation, lasting unemployment and unused skill. on the theoretical point, the writer has contributed to the formula and research of basic equilibrium versions that permit for fee rigidities and extra offer. those versions have fascinating macroeconomic implications and lend themselves to econometric implementation. They therefore aid to drag jointly separate branches of economics. those types have additionally been chanced on worthwhile within the learn of similar subject matters, akin to equilibrium with expanding returns, public items, fee dynamics and the restrictions of salary flexibility. This choice of papers is consultant of efforts via eu economists to combine micro- and macro-economics, and to take advantage of thought for empirical and coverage reasons. How their considering constructed, and what contribution of lasting worth it made, is sketched in an summary bankruptcy.

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Extra resources for Underemployment Equilibria: Essays in Theory, Econometrics and Policy

Sample text

All these expressions have natural counterparts for employment with (9) 18 Overview An illustrative implication would be 'h, . w, = 1tc1 · '1L1 . w, + 1tK1 · '1L(YD,) . W, + 1tR 1 · '1LS, . W, · ( 1 0) Let us look at an empirical application. fig. 3, reproduced from Sneessens and Dreze ( l 986a), presents empirical estimates of the four variables in (9) for the Belgian economy over the period 1955-82. We observe balanced growth during the sixties and early seventies, when potential employment L*, Keynesian labour demand L( YD) and labour supply LS followed the same trend.

2. The approach taken by these authors consists in postulating a statistical distribution of supplies and demands on micromarkets for goods and types of labour. The means of the distribution are related to the standard definitions of aggregate supply and demand for the national economy. The deviations from the mean reflect the idiosyncrasies of individual markets. The authors mentioned above, and several others - Gourieroux et al. (1 984), Martin ( 1986) - make a specific assumption about the form of the Underemployment equilibria 17 statistical distribution.

2. In comparison with the Keynesian multiplier, fig. l contains two important innovations. First, it brings in the supply side explicitly and from the start - a step postponed to ch. 2 1 in Keynes ( 1936). Macroeconomics thus becomes intrinsically two-sided, and a proper framework is at hand to study the balance of supply-side policies and effective demand policies, or to meet such concerns of policy-makers as the limitations placed on fiscal expansion by latent inflationary pressures and capacity constraints.

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