Working Paper: NBER ID: w2093
Authors: Bruce C. Greenwald; Joseph E. Stiglitz
Abstract: This paper describes how imperfect information in both capital and labor markets can, in a context of maximizing firms and perfectly flexible prices and wages, give rise to cyclical variations in unemployment whose character closely resembles that of observed business cycles.
Keywords: Imperfect Information; Credit Markets; Unemployment; Efficiency Wages
JEL Codes: E24; E32; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Imperfect information in capital markets (D83) | Fluctuations in the effective marginal product of labor (J29) |
| Fluctuations in the effective marginal product of labor (J29) | Employment levels (J23) |
| Imperfect information in capital markets (D83) | Unemployment (J64) |
| Risk-adjusted marginal product of labor falls below disutility of labor (J79) | Temporary layoffs (J63) |
| Capital market imperfections (G19) | Involuntary unemployment (J64) |
| Efficiency wage theories (J33) | Unemployment dynamics (J64) |