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The Dynamics of Unemployment, Capacity Constraints and Demand Shortages

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  • David De La Croix
  • Jean-François Fagnart

Abstract

This paper presents an intertemporal model in which the agents may face different quantity constraints resulting from technological rigidities, microeconomic uncertainty and market segmentation. Its main purpose is to derive the path of the unemployment rate, the rate of capacity utilisation and the proportion of firms reporting demand constraints from a union-firm optimisation programme. The model is calibrated and the impact of different unfavourable shocks is simulated using a new algorithm for solving dynamic non-linear models. The present exercice underlines the need for caution in interpreting business surveys indicators.

Suggested Citation

  • David De La Croix & Jean-François Fagnart, 1995. "The Dynamics of Unemployment, Capacity Constraints and Demand Shortages," Annals of Economics and Statistics, GENES, issue 37-38, pages 441-463.
    • Handle: RePEc:adr:anecst:y:1995:i:37-38:p:441-463
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    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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