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Equilibrium Unemployment as a worker discipline device.
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Robin Mehta Summary of Equilibrium Unemployment as a worker discipline device by Carl Shapiro and Joseph Stiglitz In a perfectly competitive labour market we expect to see that the demand for labour is equal to the supply of labour at a given equilibrium wage. If the wage paid to employees is higher then this equilibrium wage then the demand for labour will fall short of the supply and will cause some rate of unemployment.(This working the opposite way as well.) When we find the wage being paid higher or lower than the equilibrium wage we expect to see it automatically falling or rising back to equilibrium level. However if we cite examples from real life we can almost always see that this isnt the case. We can more frequently than not discover that the equilibrium wage is being bettered by firms, and is consistently holding that level. Why this rewarding of...
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