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Rigidities and full employment

Author

Listed:
  • Noriega Ureña, Fernando Antonio

    (Universidad Autónoma Metropolitana, Unidad Azcapotzalco)

  • Velázquez Orihuela, Daniel

    (Universidad Autónoma del Estado de Hidalgo)

Abstract

It is axiomatically shown in this paper that neoclassical theory does not admit any possibility of disequilibrium. If agents while calculating their supply and demand plans take into account the stickiness in the prices vector, the effect of it is annulled, and the economy -eventually not competitive due to the stickinessfunctions as if it was competitive at all. Full employment equilibrium becomes a result even under sticky wages, which implies that in the neoclassical framework it is not possible to explain involuntary unemployment, not even under the assumption of exogenous stickiness.

Suggested Citation

  • Noriega Ureña, Fernando Antonio & Velázquez Orihuela, Daniel, 2010. "Rigidities and full employment," Revista de Economía Política de Buenos Aires, Universidad de Buenos Aires. Facultad de Ciencias Económicas., issue 7-8, pages 145-177, December.
    • Handle: RePEc:ake:repba1:y:2010:i:7-8:p:145-177
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    Keywords

    Rigidities; full employment;

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