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Neo-classical labour market dynamics, chaos and the Phillips curve

Author

Listed:
  • Luciano Fanti
  • Piero Manfredi

Abstract

The relationship between wage inflation and unemployment has been extensively investigated since the early work of Phillips (1958) and Lipsey (1960), and is still a matter of debate. In this paper we study the dynamics of a standard neoclassical labour market under Walrasian adjustment rules. We show that, when consumption and leisure are sufficiently low substitutes, the unique Walrasian equilibrium of the economy can be destabilised and regular or even chaotic fluctuations of wages and employment appear. This leads to an interesting resurrection of the Phillips curve as a long term phenomenon.

Suggested Citation

  • Luciano Fanti & Piero Manfredi, 2003. "Neo-classical labour market dynamics, chaos and the Phillips curve," Discussion Papers 2003/21, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2003/21
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2003-21.pdf
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    Citations

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    Cited by:

    1. Luciano Fanti & Luca Gori, 2012. "Endogenous Lifetime in an Overlapping-Generations Small Open Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 68(2), pages 121-152, June.
    2. Marco Guerrazzi, 2005. "Notes on Continuous Dynamic Models: the Benhabib-Farmer Condition for Indeterminacy," Discussion Papers 2005/54, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Luciano Fanti & Luca Gori, 2011. "On economic growth and minimum wages," Journal of Economics, Springer, vol. 103(1), pages 59-82, May.
    4. Manuela Gussoni & Andrea Mangani, 2012. "The Impact of Public Funding for Innovation on Firms' R&D Investments: Do R&D Cooperation and Appropriability Matter?," L'industria, Società editrice il Mulino, issue 2, pages 237-254.
    5. Fanti, Luciano & Gori, Luca, 2010. "Child policy solutions for the unemployment problem," Economics Letters, Elsevier, vol. 109(3), pages 147-149, December.
    6. Luciano Fanti & Luca Gori, 2009. "Longevity, fertility and PAYG pension systems sustainability," Discussion Papers 2009/77, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    7. Alga Foschi, 2004. "Industria portuale marittima e sviluppo economico negli Stati Uniti," Discussion Papers 2003/26, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    8. Lorenzo Corsini & Pier Mario Pacini & Luca Spataro, 2010. "Workers' Choice on Pension Schemes: an Assessment of the Italian TFR Reform Through Theory and Simulations," Discussion Papers 2010/96, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    9. Lorenzo Corsini & Elisabetta Olivieri, 2008. "Technological Change and the Wage Differential between Skilled and Unskilled Workers: Evidence from Italy," Discussion Papers 2008/73, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    10. Luca Gori, 2009. "Endogenous fertility, family policy and multiple equilibria," Discussion Papers 2009/79, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Luciano Fanti & Luca Gori, 2009. "Endogenous fertility, endogenous lifetime and economic growth: the role of health and child policies," Discussion Papers 2009/91, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    12. Maurizio Lisciandra, 2007. "The Role of Reciprocating Behaviour in Contract Choice," Discussion Papers 2007/65, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    13. Luciano Fanti & Luca Gori, 2009. "Child policy ineffectiveness in an OLG small open economy with human capital accumulation and public education," Discussion Papers 2009/93, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    14. Luciano Fanti & Luca Gori, 2008. "PAYG pensions and economic cycles: exogenous versus endogenous fertility," Discussion Papers 2008/75, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

    More about this item

    Keywords

    Phillips curve; chaos; economic cycle;
    All these keywords.

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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