The basic model

  • Josef Falkinger
Part of the Contributions to Economics book series (CE)


The model presented in this chapter is basic in two respects: First, the model will be extended and applied in the following chapters. Second, it is parsimonious and concentrates on the minimal features that are necessary to capture the macroeconomic consequences of the idea that productive work requires an organized environment and employment means to have a place in this environment. These minimal features are: i) Two stages must be distinguished a first stage at which the organizational capacity is established, and a second stage at which production and transactions are going on within the organized capacity. ii) There must be some form of imperfect competition at stage 2 so that the non-production costs incurred at stage 1 can be covered by a mark up on production costs. iii) The costs of creating the organizational capacity for productive work must depend on the abilities of the available work force, as compared to the abilities required by the used technologies and methods of organization. iv) The quality of the available work force varies with the level of aggregate employment.


Wage Rate Real Wage Labor Demand Good Market Full Employment 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2002

Authors and Affiliations

  • Josef Falkinger
    • 1
  1. 1.Socioeconomic Institute Chair for Public Finance and MacroeconomicsUniversity of ZurichZurichSwitzerland

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