Unemployment {continued)

and nominal rigidity, 220

and non-VValrasian theories, 439

and policymaking, 418

and quality of jobs, 469

and real wage, 215-216

and search and matchmg models, 480

variance of, 416

and wage contracts, 463

and wage rigidity, 215-216

{See also Employment) Unemployment-inflation tradeoff, 225-227, 292-293

{See aho Output-inflation tradeoff) Unemployment insurance, 489-490 Unions, 486-487, 490-491 Umt root, 176 Utihty:

constant-relative-risk-aversion (CRRA),

40, 73, 324, 330 instantaneous, 39-40. 153 nonexpected, 333 quadratic, 319, 333

Vacancies, 474, 478 Variables:

control, 352

costate, 352

real vs. nominal, 225

state, 352

Wage adjustment, 449-450, 483-484 Wage.s, 482-483 flexible, 217

and government-purchases shock, 174 insiders vs. outsiders, 466-468 interindustry differences in. 484-486 and labor demand, 478 nominal, 242

predetermined vs. fixed, 257 real:

and aggregate demand, 215-216 cyclical behavior of, 150, 163-164.

189n. 216-219, 285-288, 439-440,

and demand shocks, 444 and labor supply, 218-220 vs. nominal, 242 rigidity of, 463-465, 478 rigidity of, 214-222 setting, 470-471, 475, 481-484 and shirking, 455-456 and technology shocks, 170 uncertainty about, 156-158 and unemployment, 457 (5ee also Efhciency wages) Wait unemployment, 469 Walrasian model, 150 Wars, 61-64 Welfare (social): and consumption variability. 414-415 and cross-country income differences. 5 m Diamond model, 81-83 and equilibrium unemployment, 480-481 and variability of hours, 415-416 and inflation, 429-432 in Ramsey-Cass-Koopmans model,

50-52, 81 and unemployment, 413 White-noise disturbances, 154 Work-sharing vs. layoffs, 460 Workers: abilities ot, 441-442 and interindustry wage differences, 485-486 heterogeneous, 473 and long-term relationships with

employers, 461 and monitoring, 450 shirking, 441-442, 454-456

{See also Shapiro-Stiglitz model) skills ol, 473

{See also Insiders; Outsiders) Y =AK models. 104, 116-121, 136