While modern economic theorists have produced a variety of explanations for the failure of wages to fall in the face of unemployment, Keynes emphasis on relative wages has not been reflected in most contemporary discussions. This short paper suggests that relative wage theories in which workers'...

Using a dynamic efficiency wage model, where a Phillips curve appears because worker morale depends on the unemployment rate and a change in nominal wages, we analyze the effects of fiscal and monetary expansions and of an employment subsidy on unemployment in two steady states. In one steady...