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A Steady-state Model Of A Non-Walrasian Economy With Three Imperfect Markets

Date Added: Jun 2011
Format: PDF

Unemployment may depend on equilibrium in other markets than the labor markets. This paper addresses this old idea by introducing search frictions on several markets: in a model of credit and labor market imperfections as in Wasmer and Weil (2004), the author further introduce search on the goods market. The model can be solved by blocks: on two of the three markets, the relevant "Market tightness" is a constant of parameters. In particular, goods market tightness, expressed as the ratio of unmatched consumers to unmatched firms, is equal to 1 which corresponds to a stochastic Say's law: demand and supply are stochastically in equilibrium.