Natural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returns
We present a continous time non tatonnement process for frictionless and perfectly competitive markets with (possibly non convex) production, where the natural rate of unemployment (NRU) emerges as the asymptotic value of unemployment. Consumers and producers are myopic and repeatedly participate i...
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| Format: | Working paper |
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University of Oxford
2008
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| _version_ | 1797054737027170304 |
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| author | Giraud, G Rochon, C |
| author_facet | Giraud, G Rochon, C |
| author_sort | Giraud, G |
| collection | OXFORD |
| description | We present a continous time non tatonnement process for frictionless and perfectly competitive markets with (possibly non convex) production, where the natural rate of unemployment (NRU) emerges as the asymptotic value of unemployment. Consumers and producers are myopic and repeatedly participate in Mertens' (2003) limit-price mechanism. We show that underemployment and unsold inventories can survive along the solution paths of our dynamics - the hallmark of the failure of Say's law. The following paradox appears: A nonzero NRU is compatible with Pareto optimality; conversely, full employment is compatible with sub optimality. Nevertheless, each trade and production path of our price quantity dynamics converges to some infinitesimal Pareto optimal point as long as there are no unsold inventories at the limit. |
| first_indexed | 2024-03-06T19:01:25Z |
| format | Working paper |
| id | oxford-uuid:13a877ca-7d39-45e5-a44f-a8b68aba32a0 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T19:01:25Z |
| publishDate | 2008 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:13a877ca-7d39-45e5-a44f-a8b68aba32a02022-03-26T10:15:06ZNatural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returnsWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:13a877ca-7d39-45e5-a44f-a8b68aba32a0Symplectic ElementsBulk import via SwordUniversity of Oxford2008Giraud, GRochon, CWe present a continous time non tatonnement process for frictionless and perfectly competitive markets with (possibly non convex) production, where the natural rate of unemployment (NRU) emerges as the asymptotic value of unemployment. Consumers and producers are myopic and repeatedly participate in Mertens' (2003) limit-price mechanism. We show that underemployment and unsold inventories can survive along the solution paths of our dynamics - the hallmark of the failure of Say's law. The following paradox appears: A nonzero NRU is compatible with Pareto optimality; conversely, full employment is compatible with sub optimality. Nevertheless, each trade and production path of our price quantity dynamics converges to some infinitesimal Pareto optimal point as long as there are no unsold inventories at the limit. |
| spellingShingle | Giraud, G Rochon, C Natural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returns |
| title | Natural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returns |
| title_full | Natural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returns |
| title_fullStr | Natural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returns |
| title_full_unstemmed | Natural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returns |
| title_short | Natural rate of unemployment and efficiency: a dynamic analysis with flexible prices and increasing returns |
| title_sort | natural rate of unemployment and efficiency a dynamic analysis with flexible prices and increasing returns |
| work_keys_str_mv | AT giraudg naturalrateofunemploymentandefficiencyadynamicanalysiswithflexiblepricesandincreasingreturns AT rochonc naturalrateofunemploymentandefficiencyadynamicanalysiswithflexiblepricesandincreasingreturns |