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Microfoundations of Unemployment Theory
Author(s) -
Lindbeck Assar
Publication year - 1991
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/j.1467-9914.1991.tb00044.x
Subject(s) - unemployment , microfoundations , economics , involuntary unemployment , insider , efficiency wage , labour economics , full employment , wage , keynesian economics , macroeconomics , law , political science
. Both the efficiency wage theory and the insider‐outsider theory are promising attempts to explain the existence of unemployment. These theories also explain why workers are often laid‐off or fired, rather than retained at lower wages than the initial ones when there is a reduction in the demand for labour. The type of unemployment that is explained in these theories may also be called “involuntary” in a well‐defined way; the distinction between voluntary and involuntary unemployment is then made on the basis of the constraints that apply for economic agents. This paper tries to pin down such constraints, and to investigate whether various theories of unemployment are able to answer the fundamental questions that a good theory of unemployment should be able to answer.