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The Impossibility of "Involuntary Unemployment" in an Overlapping Generations Model with Rational Expectations

Author

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  • Christian Schultz

    (Institute of Economics, University of Copenhagen)

Abstract

If there is unemployment no matter how low the wage rate becomes, one speaks of involuntary unemployment. This phenomenon has been shown to arise in a variety of temporary or atemporal macro models with imperfect competition in the goods markets. In this paper, the author investigates whether the phenomenon of involuntary unemployment arises in an overlapping generations model with rational expectations. It does not, neither in the short nor in the long run.

Suggested Citation

  • Christian Schultz, 1989. "The Impossibility of "Involuntary Unemployment" in an Overlapping Generations Model with Rational Expectations," Discussion Papers 89-18, University of Copenhagen. Department of Economics, revised Oct 1989.
    • Handle: RePEc:kud:kuiedp:8918
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    Cited by:

    1. Kaas, Leo & Madden, Paul, 2005. "Imperfectly competitive cycles with Keynesian and Walrasian features," European Economic Review, Elsevier, vol. 49(4), pages 861-886, May.
    2. Tanaka, Yasuhito, 2020. "Fiscal policy under involuntary unemployment," MPRA Paper 102507, University Library of Munich, Germany.
    3. Kaas, Leo & Madden, Paul, 2004. "Non-existence of market-clearing wages when the output market is imperfectly competitive," Economics Letters, Elsevier, vol. 84(2), pages 175-182, August.
    4. Stefanadis, Christodoulos, 2023. "Oligarchy, underutilized capacity, and government policy," European Economic Review, Elsevier, vol. 160(C).
    5. Laurence S. Lasselle & Serge A. Svizzero, 2002. "Involuntary Unemplyment in Imperfectly Competitive General Equilibrium Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 487-507, September.
    6. Kaas, Leo, 1998. "Multiplicity of Cournot Equilibria and Involuntary Unemployment," Journal of Economic Theory, Elsevier, vol. 80(2), pages 332-349, June.
    7. L Kaas & P Madden, 2002. "Competitive Wage Cycles with Imperfect Output Market Competition," Economics Discussion Paper Series 0212, Economics, The University of Manchester.
    8. Tanaka Yasuhito, 2022. "Involuntary Unemployment Under Ongoing Nominal Wage Rate Decline in Overlapping Generations Model," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 67(1), pages 11-26, April.
    9. Hiroyuki Nishiyama & Yasuhiro Gintani, 2013. "The Effects of Globalization on the Elasticity of Labor Demand and Employment," International Economic Journal, Taylor & Francis Journals, vol. 27(1), pages 11-23, March.
    10. Rankin, Neil, 1995. "Money in Hart's model of imperfect competition," European Journal of Political Economy, Elsevier, vol. 11(3), pages 557-575, September.

    More about this item

    Keywords

    labor economics; employment studies; general equilibrium and disequilibrium theory;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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