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Can a Real Wage Decrease Cure Unemployment? A General Equilibrium Analysis for Belgium

Published online by Cambridge University Press:  17 August 2016

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Extract

In a series of papers (Ginsburgh and Erlich (1984), Ginsburgh and Van der Heyden (1985), Erlich, Ginsburgh and Van der Heyden (1985)), we have tried to assess by how much the real wage should be or should have been decreased in order to ensure short and/or long run full employment.

This short note describes the main ideas lying behind the general equilibrium model built to answer these questions and summarizes the main results.

The model attempts to embed a situation of short run market imperfections into a long run competitive equilibrium framework. If price rigidities and a lack of substitution between factors are acceptable assumptions in the short run, there do exist no better concepts than flexible prices, substitution possibilities and equilibrium in all markets in the long run.

Type
PART THREE: Specific Issues
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1985 

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References

REFERENCES

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