Public production and shadow pricing in a model of disequilibrium in labour and capital markets (Q1060667)

This paper develops second-best rules for public investment and employment in various regimes of disequilibrium on the capital and the labour markets. The model used is very simple so as to imply rules which can easily be interpreted and contrasted with the current literature on the subject. Another issue considered is that of possible changes of regimes within a process of welfare improvement involving adjustments in the public production plan; it is dealt with through a numerical example which points out that such changes can indeed occur.