Protection, Employment and Welfare in a ‘Stagflating’ Economy
This paper examines the impact of protection in an economy in which production is held back by a rigid real wage that exceeds the level at which the labour market clears. The supply of labour exceeds the producers’ demand; workers are ‘rationed on the labour market’, to use the terminology of fixed price equilibrium theory. Prices are flexible, and goods markets clear without a need to constrain supply or demand.
KeywordsWage Rate Real Wage Labour Demand Unemployment Benefit Nominal Wage
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