Campus Units

Economics

Document Type

Response or Comment

Publication Version

Published Version

Publication Date

9-1979

Journal or Book Title

The American Economic Review

Volume

69

Issue

4

First Page or Article ID Number

718

Last Page

720

Abstract

Edward Ray, in his comment on my 1976 paper, analyzes a slightly different model than the one I presented, and thus reaches different conclusions. His principal conclusions are that: (i) given wage rigidities, a wage subsidy to producers is needed, and this subsidy is equivalent to the optimal static subsidy that ensures full employment in each sector; and (ii) given the forced equilization of wages across sectors, a subsidy to workers is needed to encourage labor transfers between sectors. Thus, Ray finds that full employment is always desirable, whereas I find that some unemployment is (usually) present along the optimum path.

Comments

This is a response of an article from The American Economic Review 69 (1979): 718. Posted with permission.

Copyright Owner

American Economic Association

Language

en

File Format

application/pdf

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