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The Keynesian nexus between the market for goods and the labour market

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  • Guerrazzi, Marco

Abstract

In this paper, I build on the Keynesian analysis of the market for goods to draw some implications on the behaviour of some typical labour market magnitudes. Specifically, without invoking the assumption of constant nominal wages but making instead the distinction between the aggregate expected demand function and the aggregate expenditure function, I discuss the implied "daily" adjustments of expected and actual real wages that allow to achieve a short-run equilibrium. In addition, I offer a microfoundation for equilibrium unemployment due to deficient demand grounded on modern searching-and-matching theory.

Suggested Citation

  • Guerrazzi, Marco, 2022. "The Keynesian nexus between the market for goods and the labour market," MPRA Paper 115428, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:115428
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    References listed on IDEAS

    as
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    6. Jochen Hartwig, 2006. "Explaining the aggregate price level with Keynes's principle of effective demand," Review of Social Economy, Taylor & Francis Journals, vol. 64(4), pages 469-492.
    7. Sylvie Rivot, 2020. "Keynes’ treatment of dynamics and stability in a monetary economy: the role played by expectations from the Tract on Monetary Reform to the General Theory," Post-Print hal-04014356, HAL.
    8. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, April.
    9. Marco Guerrazzi & Paolo Gelain, 2015. "A demand-driven search model with self-fulfilling expectations: the new 'Farmerian' framework under scrutiny," International Review of Applied Economics, Taylor & Francis Journals, vol. 29(1), pages 81-104, January.
    10. Marco Guerrazzi, 2023. "Optimal growth with labor market frictions," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 961-987, December.
    11. Torr, Christopher, 1984. "The Microfoundations of Kenyes's Aggregate Supply and Expected Demand Analysis: A Comment," Economic Journal, Royal Economic Society, vol. 94(376), pages 936-940, December.
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    18. Sylvie Rivot, 2020. "Keynes’ treatment of dynamics and stability in a monetary economy: the role played by expectations from the Tract on Monetary Reform to the General Theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 27(4), pages 523-548, July.
    19. Amita va Krishna Dutt, 1991. "Expectations and Equilibrium: Implications for Keynes, the Neo-Ricardian Keynesians, and the Post Keynesians," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 14(2), pages 205-224, December.
    20. Roger E.A. Farmer, 2013. "Animal Spirits, Financial Crises and Persistent Unemployment-super-," Economic Journal, Royal Economic Society, vol. 0, pages 317-340, May.
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    22. Souleles, Nicholas S., 2002. "Consumer response to the Reagan tax cuts," Journal of Public Economics, Elsevier, vol. 85(1), pages 99-120, July.
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    24. Casarosa, Carlo, 1984. "The Microfoundations of Keynes's Aggregate Supply and Expected Demand Analysis: A Reply," Economic Journal, Royal Economic Society, vol. 94(376), pages 941-945, December.
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    1. Marco Guerrazzi, 2023. "Optimal growth with labor market frictions," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 961-987, December.

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    More about this item

    Keywords

    Keynesian economics; expected demand; expenditure function; aggregate supply;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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