Sticky wage, efficiency wage and Keynesian unemployment

Research output: Journal PublicationsJournal Article (refereed)peer-review

1 Citation (Scopus)


This paper provides a model of involuntary unemployment by combining the insights of the sticky wage theory and the efficiency wage theory. It implies that employed workers tend to supply more effort in response to economic downturns. Thus, a negative shock to an economy has intriguing impacts on the unemployment. The model also shows that a negative demand shock may have a relatively small effect on output since changes in work effort serve to partially mitigate the effects of the shock. Moreover, it yields some implications that complement the existing 'work sharing' literature.
Original languageEnglish
Pages (from-to)213-224
Number of pages12
JournalPacific Economic Review
Issue number2
Publication statusPublished - 1 May 2007

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