The different aspects of wage rigidity and flexibility in Keynesian analysis

The paper analyses different aspects of the role of wages in Keynesian Economics. It argues that a reduction in money wages - a policy prescription to fight unemployment usually found in orthodox analysis - may have a negative effect on the level of activity. Also, it argues that the conventional view of Keynesian macroeconomics (based on the rigidity of wages) misinterprets Keynes’s own views in the General Theory. ln the book Keynes points out that wide fluctuations of. wages are not desirable since they would lend instability to the economic system.

KEYWORDS:
Wage rigidity; wages; history of economic thought; Keynesianism