EFFICIENCY WAGES AND THE BUSINESS-CYCLE PUZZLE

The main thrust of this work is to open the Real Business Cycle (RBC) methodology to non-Walrasian considerations and, reciprocally, to submit some non-Walrasian models to the discipline of the RBC approach. In doing so, we provide a first RBC model with involuntary unemployment and a suboptimal equilibrium path. We also demonstrate the promise and difficulty of resolving the business cycle puzzle by appealing to quantity rationing in the labor market. © 1990.