Aggregate Demand, Job Search, and Employment

Bibliographic Data

ID10170978
AuthorsHerschel I Grossman (corresponding author)
Year1973
Volume81
Issue6
Pages1353-1369
Publication date1973-11-01
Open AccessNo
TypeARTICLE
VenueJournal of Political Economy (JOURNAL)
Journal identifiersISSN: 0022-3808 • E-ISSN: 1537-534X
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/260131
OpenAlexW1989795303
LanguageEN
Citations received4
References cited8

This paper presents a critical evaluation of the recent emphasis on job-search and employment-acceptance friction as an explanation for the actual causal relationship between aggregate demand and employment. Although job-search theory seems to provide a choice-theoretic basis for the relationship between aggregate demand and employment, the paper points out that prominent qualitative aspects of the predicted relationship between aggregate demand and employment are empirically unacceptable. In particular, the analysis of employment-acceptance friction (1) does not allow for layoffs and nonwage rationing of jobs, (2) predicts that cyclical variations in employment will involve countercyclical variation in real wages rates, and (3) predicts that cyclical variations in employment will involve countercyclical variations in consumption expenditures. As an alternative, the paper suggests that analysis of friction in the process by which markets are cleared can provide a more satisfactory theoretical basis for the causal relationship between aggregate demand and employment

Aggregate (composite · Aggregate demand · Clearance · Consumption (sociology · Economics · Labor demand · Labour economics · Macroeconomics · Microeconomics · Rationing · Wage · Economic theories and models · Economic Theory and Policy · Labor market dynamics and wage inequality

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