"The aggregate neoclassical growth model - with a labor income tax or "labor market distortion" that began growing at the end of 2007 as its only impulse - produces time series for aggregate labor usage, consumption, investment, and real GDP that closely resemble actual U.S. time series. Of...

By assuming Cobb-Douglas production technology, many well-known imperfectlycompetitive macroeconomic models of the labour market (e.g. Layard, Nickell andJackman, 1991) imply that equilibrium unemployment is independent of the capitalstock. This paper introduces a new notion of capacity into the...