NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Challenge of High Unemployment

Alan S. Blinder

NBER Working Paper No. 2489 (Also Reprint No. r1071)
Issued in 1988
NBER Program(s):   EFG

It is argued that policymakers, macroeconomists and microeconomists should all take high unemployment more seriously. The shortcomings of existing theories of unemployment are discussed, and a new definition of involuntary unemployment is proposed. A model is sketched in which falling aggregate demand leads to "Keynesian" unemployment because labor is heterogeneous and relative wages matter. Microeconomic theory is criticized for assuming away unemployment and, in the process, radically changing the answers to some basic questions in trade theory and public finance. Finally, some speculative explanations are offered for the low unemployment now found in states like New Jersey and Massachusetts.

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Document Object Identifier (DOI): 10.3386/w2489

Published: Blinder, Alan S. "The Challenge of High Unemployment." From The American Economic Review, Vol. 78, No. 2, pp. 1-15, (May 1988). citation courtesy of

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