We incorporate the consumption-ability relationship of static "efficiency wage" models into a dynamic general equilibrium model. We show that for many aggregate land stocks, there is a continuum of unemployment rates which could persist indefinitely as part of a stationary equilibrium. For many of these aggregate land stocks, both unemployment and full employment are distrinct possibilities. Broadly speaking, more unemployment corresponds to more undernourishment and more inequality in land distribution. Thus our results suggest that the market mechanism is less efficacious than land reform in reducing unemployment and undernourishment.
- Federal Reserve Bank of Minneapolis. Research Department.
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