Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/34300 
Year of Publication: 
2007
Series/Report no.: 
IZA Discussion Papers No. 2718
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper builds a macroeconomic model of equilibrium unemployment in which firms persistently face difficulties in selling their production and this affects their decisions to create jobs. Due to search-frictions on the product market, equilibrium unemployment is a U-shaped function of the ratio of total demand to total supply on this market. When prices are at their Competitive Search Equilibrium values, the unemployment rate is minimized. Yet, the Competitive Search Equilibrium is not efficient. Inflation is detrimental to unemployment.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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