Chapter Questions
Explain in what sense the standard neoclassical labour demand curve does not comply with Walras' Law.
Explain why an IS curve faithful to Keynes must admit a price level that is an increasing function of investment.
Keynes' arguments on why the labour demand curve is decreasing in the short period can be argued to reveal awareness of the substitutability problem. Explain.
'Determination of the labour demand curve is impossible both in a long-period framework, and in a neo-Walrasian framework (without auctioneer)'. Explain.
Variability of capacity utilization can be argued to imply that, within limits, there is no obstacle to a simultaneous rise of real wages and of employment. Explain.
Motivate the inevitability of some frictional unemployment.
Explain why Pissarides' analysis of stability of his model is not about stability.
Explain why, in the search theory approach to wages, free entry can be argued to imply there is no surplus generated by a filled job and to be divided between the firm and the worker.
'The Beveridge curve explained via the matching function tells us that if something determines the rate of unemployment and keeps it constant, then that same something also determines the corresponding volume of vacancies'. Explain.
List the main weaknesses of the insiders-outsiders approach.
'In the efficiency wage approaches, it is firms that refuse to let wages decrease in the presence of unemployment'. Explain.
Reproduce and explain D Fig. 13.2.
Why are two 'Solow conditions' necessary in the Bowles version of efficiency wages?
Illustrate the use of a recursive approach to determine consumer choice in the shirking model.
. Explain how the shirking version of the efficiency wage approach is used to argue the inevitability of involuntary unemployment, and how the claim that the resulting unemployment is involuntary can be criticized.
'One important weakness of the shirking version of the efficiency wage approach is that it neglects retirement'. Discuss and assess.
Explain why the monopoly union model assumes interpersonal comparability of cardinal utilities.
In the presentation of the right-to-manage model in the main text an alternative way to prove Hotelling's Lemma appears. Explain it.
Explain the difference between Nash bargaining and generalized Nash bargaining.
A frequent criticism of the Ashenfelter-Johnson model of strikes is that the rank-and-file behave irrationally. Explain the criticism and how it can be answered.
What can be derived from Blanchflower and Oswald's wage curve?
Explain the limit of the gift exchange approach to efficiency wages and how similar it is to the shirking approach.
Within the Solow-Hahn approach the no-undercutting norm needs a very low elasticity of labour demand, and the text argues that this poses a dilemma for the neoclassical economist. Explain.
Explain why Eq. (13.42) questions the Cambridge approach to the determination of income distribution.
The text concludes that 'it is not plausible to explain the behaviour of real wages in the way suggested by Joan Robinson'. Why?
Use Eq. (13.42) to illustrate the possibility of Harrodian instability.
Indicate some criticism of the thesis that investment is an increasing function of the rate of profit because it is an increasing function of the difference between rate of profit and rate of interest.
Summarize the reasons indicated in the text why the Goodwin model is not fully persuasive.