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On Alternative Approaches to Employment Dynamics
Credit and Capital Markets – Kredit und Kapital, Vol. 9 (1976), Iss. 2 : pp. 164–176
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Lenard, Thomas M.
References
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Abstract
On Alternative Approaches to Employment Dynamics
This paper compares the effects of imperfect price and money wage information in a three good aggregate model. When price information is imperfect employment will rise (temporarily) in response to an expansionary disturbance only if learning is sluggish relative to labor market adjustment. When money wage information is imperfect, this short run tradeoff between employment and price change is obtained as long as learning is not instantaneous. Both the learning lag and the lag of wages behind prices play a role. In response to a contractionary disturbance the assumptions of imperfect information will not affect the employment path followed.