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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

Victor Ginsburgh
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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
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 51 , Issue 3-4 , December 1985 , pp. 381 - 386
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1985 

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References

REFERENCES

Cherif, M. et al. (1978), Modèle Central et Modèles de Demande Finale, Programme National R&D Energie, Services de la Programmation et de la Politique Scientifique, Bruxelles.Google Scholar
Dreze, J. And Modigliani, F. (1981), The Trade-off Between Real Wages and Employment in an Open Economy (Belgium), European Economic Review 15, 1–40.Google Scholar
Erlich, S., Ginsburgh, V. and Van der Heyden, L. (1985), Where Do Real Wage Policies Lead Belgium; A General Equilibrium Analysis, manuscript.Google Scholar
Ginsburgh, V. and Erlich, S. (1984), Faut-il Réduire le Salaire Réel en Belgique?, Cahiers Economiques de Bruxelles 103, 349–69.Google Scholar
Ginsburgh, V. and Van der Heyden, L. (1985), General Equilibrium with Wage Rigidities: an Application to Belgium, Mathematical Programming Study, forthcoming.Google Scholar
Sneessens, H. (1985a), On the Interpretation of the Keynesian Classical Unemployment Distinction, Faculté Libre de Sciences Economiques, Lille, manuscript.Google Scholar
Sneessens, H. (1985b), private communication.Google Scholar