Fiscal Policies in a General Equilibrium Model with Persistent Unemployment

This work was written during my visits at CORE (Belgium), at the Faculty of Economics and Politics in Cambridge (England), and at the Department of Mathematics at the ETH in ZUrich. I wish to thank J.H. Dr~ze (CORE) for most help- ful suggestions, and I am indebted to H. BUhlmann (ETH) for his advice and for encouragement. The comments by M. Granzio1, M. Janssen and by anonymous referees were very useful. However, I assume the responsibility for remaining errors. I am grateful to R. Boller, I. Lather and M. Urfer for their careful typing of the manuscript. Support by the SWiss National Science Foundation is acknowledged. An earlier version of this work was presented at the European Meeting of the Econometric Society 1981 in Amsterdam. In 1981 it was accepted as a "e;Habi1itations- schrift"e; in Mathematical Economics by the Department of Mathematics at the ETH in ZUrich. CONTENTS Introduction 1 Part I: The General Model 8 1.1. Formulation of the General Model 8 1.1.1. General Properties 8 1.1.2. The Consumer 10 1.1.3. The Producer 14 1.1.4. The Public Sector 16 Equilibrium 1.2.