Underemployment Equilibria: Essays in Theory, Econometrics and Policy

594 Pages·2011·17.785 MB·English

by  Jacques Drèze

This book is a selection of Jacques Dreze's work over the last ten years on the
topics of lasting unemployment, stagflation and unused capacity. At the
theoretical level, the author has contributed to the formulation and analysis of
general equilibrium models which allow for price rigidities and excess supply
and lend themselves to econometric implementation, thus helping to pull
together separate branches of economics. The book also contains papers
focussing on policy analysis at a Belgian and European level. This collection
thus represents an attempt to integrate micro- and macroeconomics, and to use
theory for empirical and policy purposes.

Underemployment equilibria

Underemployment
Equilibria
Essays in Theory,
Econometrics and Policy
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A catalogue recordfo r this publication is available from the British Library
Library of Congress Cataloguing in Publication Data
DrezJea,c quHe.s
Underemployemqeunitl iebsrsiaaiy:nts h eoreyc,o nometarnidc s,
policy/JHa.cD qrueezse .
p. cm.
Incluidnedse x.
ISBNo 523I9 3I38
rU.n deremployment -Mathema2t.iE cqauli lmi(obEdrceiolans o.m i-cs)
Mathematmiocdaell 3s.P. r ic-eMsa thematmiocdaell Is.T. it le.
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978-o-521-393I8-8 Hardback
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Contents
page
Preface
Acknowledgements xXxV iIvI
I OVERVIEW
1 UnderemployEmqeunitl ibFrrioam:T heortyo
3
EconometarincdPs o licy
l Introduction 3
2 Theory of Unemployment Reconsidered: An orientation
ToU R 5
3 General Equilibrium with Rationing 10
4 General Equilibrium Macroeconomics and Econometrics 15
5 Policy Conclusions and Agenda 24
Appendix: Streamlined GEM Econometric Model 28
31
II EQUILIBRIWAI TH PRICER IGIDITIES
2 Existeonfca en E xchanEgqeu ilibruinudmeP rr ice
33
Rigidities
Introduction and Contents 33
2 Price Rigidities and Quantity Rationing 34
3 The Model and a Lemma 35
4 Limited Flexibility of All Nominal Prices 39
5 Limited Flexibility of Some Nominal Prices 42
6 Limited Flexibility of Some or All Real Prices 44
7 Limited Flexibility of Some Nominal and Some Real Prices 48
Concluding Remarks 54
8
56
3 On Supply-ConstErqauiinleidb ria
Introduction 56
l
2 The Model 59
ix
x Contents
3 Supply-Constrained Equilibrium 61
4 Existence of a Supply-Constrained Equilibrium 61
5 Extension of the Existence Theorem: A Counterexample 65
6 Concluding Remark 66
4 CompetitEiqvuei liwbirtiQhau antity-TParkoidnugc earnsd
67
IncreasRientgu rtnosS cale
1 Introduction 67
2 Description of the Economy 74
3 Behaviour of the Producers 75
4 The Equilibrium Concept 82
Appendix 83
IIIE FFICIENCYO F CONSTRAINED
EQUILIBRIA 89
5 OptimalPirtoype rtioefRs a tionSicnhge mes 91
1 Introduction and Summary 91
2 The Model 97
3 Existence of Coupons Equilibria 98
4 Coupons Equilibria and Optimality 101
5 Trading of Coupons against the Numeraire 103
6 Coupons Equilibria and Pareto Improving Price Changes 103
Appendix 5.1 107
Appendix 5.2 108
Appendix 5.3 110
6 ValueosfM arketwsi tSha tiatoiroF ni xePdr ices 111
1 Introduction �11
2 Markets with Satiation 114
3 Dividend Equilibria 115
4 Value Allocations 117
5 The Main Theorem 117
6 An Informal Demonstration of the Main Theorem 119
7 Fixed-Price Markets 124
8 Alternative Approaches 127
8.1 The Core 127
8.2 The Continuum Approach 128
8.3 The Elbow Room Assumption in a Model with
Explicit Endowments 130
9 Further Results and Open Problems 131