This paper introduces the fair wage-effort hypothesis and explores its implications. This
hypothesis is motivated by equity theory in social psychology and social exchange theory in …

This paper presents a model in which insignificantly suboptimal behavior causes aggregate
demand shocks to have significant real effects. The individual loss to agents with inertial …

There have been natural reasons for the recent development and partial acceptance of
efficiency wage theory. Some theory embodying payment of more than market-clearing wages is …

Until two years ago, it was believed that the financial system as a whole was self-correcting
and that modern tools of stabilization policy—monetary policy in particular—were sufficient to …

Abstract I. Introduction, 475.—II. The model: positive properties, 477.—III. The model:
normative properties, 490.—IV. Implications and conclusion, 495.

One of the more troubling aspects of the ferment in macroeconomics that followed the demise
of the Keynesian dominance in the late 1960s has been the inability of many of the new …

Low inflation likely reflects factors whose influence should fade over time. But many
uncertainties attend this assessment, and downward pressures on inflation could prove to be …

If the response of the value of the trade balance to movements in the real exchange rate is
described by a J-curve, then a real depreciation initially worsens a balance of trade deficit, …

SUCCESSFUL MACROECONOMIC THEORIES must explain important empirical regularities.
One indisputable regularity is the highly procyclic nature of quits: many more people …

This paper concerns the robustness of economic equilibria in familiar economic models. It
addresses the question whether a small amount of nonmaximizing behavior by agents is …