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Aggregate demand deficiency, labor unions, and long‐run stagnation
Author(s) -
Murota Ryuichiro
Publication year - 2018
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12215
Subject(s) - economics , unemployment , aggregate demand , labour economics , wage , economic stagnation , full employment , demand shock , labor demand , efficiency wage , keynesian economics , macroeconomics , monetary policy , politics , political science , law
Using a money‐in‐the‐utility‐function model, this paper considers long‐run stagnation where insatiable demand for money persistently creates aggregate demand deficiency and consequent unemployment in the presence of nominal wage stickiness attributed to union wage setting. In this long‐run stagnation, generous unemployment benefits reduce unemployment. Moreover, paradoxically, unemployment declines if labor unions give weight to nominal wage gains rather than employment increases.