The Theory Of Unemployment Meets The Wage Bill Argument By George A. Akerlof And Hajime Miyazaki

864 Words Feb 2nd, 2016 4 Pages
Unemployment has been a topic under great controversy in economics, with many researchers devoting their lives in an attempt to maximize efficiency in terms of employment and productivity. This review will explore the various theoretical approaches to unemployment made by researchers in the years leading up to 2000.

The first academic journal in review is “The implicit contract theory of unemployment meets the wage bill argument” by George A. Akerlof and Hajime Miyazaki. The authors published the academic journal in 1980. The paper focuses on challenging theories of the arguments stating that “the smoothing of wages caused by implicit contract results in non-walrasian fluctuations in employment.” 1 The researchers also question this theory by stating that workers can negotiate contracts with firms that allow them to be protected against changes in employment (for example, layoffs), which leads to an economy featuring full employment.1 The journal uses several models and functions to support their argument, including the Azariadis-Baily model, the Von-Neumann-Morgenstern function, as well as the fixed-wage-cum-full-employment equilibrium theorem.1 This paper fails to recognize that not all industries are the same in terms of employment. For example, different industries have different levels of control by both the employer and employee, in terms of wages. The researchers fail to factor in the limitations on the wages the firm can pay to workers is critical to the…

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