An Equilibrium Model with Keynesian Unemployment at Walrasian Prices

An Equilibrium Model with Keynesian Unemployment at Walrasian Prices

1986Working Paper No. 908

One of the oldest and most central open problems confronting economic theory is to reconcile the fact of involuntary unemployment with the hypothesis of equilibrium by constructing a closed, reasonably complete economic model which admits such unemployment as an equilibrium phenomenon. The purpose of this paper is to offer such a model.