Increasing Flexibility in Relative Labour Costs as a means of Reducing Unemployment: Do the Theoretical Foundations Exist.

This paper a two-sector Sraffian pricing model with heterogeneous labour in conjunction with a Keynesian quantity system in order to investigate whether changes in relative employments of different types of labour can be systematically linked to changes in their relative costs. The paper employs a variant of standard choice of technique analysis for a number of numerical examples; with the focus on the change in technique and the accompanying change in relative employments as the relative costs of two labour types is varied.