Real Wages, Business Cycles and Unemployment

  • Ulrich Schlieper
Conference paper
Part of the Studies in Contemporary Economics book series (CONTEMPORARY)


The theory of fixed-price-equilibria with quantity rationing distinguishes two kinds of (involuntary) unemployment — the Keynesian and the classical variety. The latter is due to an excessively high real wage rate and the former is caused by a deficiency in aggregate demand. Basically, however, the reason for unemployment is in both cases at least one “wrong” price, i.e. at least on price is not at its Walrasian equilibrium value. Therefore, the policy conclusion drawn from these models — decrease the real wage rate when in classical unemployment and increase aggregate demand when in Keynesian unemployment — is not really correct. In both cases the price mechanism is at fault, and in both kinds of unemployment some prices have to change in order to achieve full emplyoment.


Trade Cycle Wage Rate Capital Stock Real Wage Labour Demand 
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Copyright information

© Springer-Verlag Berlin Heidelberg 1986

Authors and Affiliations

  • Ulrich Schlieper
    • 1
  1. 1.University of MannheimGermany

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