The paper develops a rigorous model of the interaction between employment, income and demand. It is shown that when agents are differently informed about the income generated in the economy, aggregate demand shocks create a Keynesian-type unemployment. Moreover, the model explains nominal...

The ability of insiders to extract rents associated with exogenous turnover costs is addressed in a dynamic model. The higher these rents, the higher is the incentives for outsiders to obtain future insider status and, thus, to underbid current insiders. As a consequence, there is a lower limit...