NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Economics of Adjustment

Andrew Caplin, John Leahy

NBER Working Paper No. 4687
Issued in March 1994
NBER Program(s):   EFG

In this paper we argue that many topics in macroeconomics can be viewed as part of the broader theory of the economics of adjustment. We argue that existing approaches to the economics of adjustment take a very narrow view of the role of information. We outline an approach to this topic that stresses the role of learning and information externalities, and discussed through examples how these concerns alter the qualitative nature of the adjustment process. In particular, there appears to be a general bias towards the underprovision of information in a variety of settings which leads to inefficient adjustment.

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Document Object Identifier (DOI): 10.3386/w4687

Published: in Rod Cross, ed., "The National Rate of Unemployment", Cambridge University Press, 1995

 
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