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Involuntary unemployment as a Nash equilibrium and fiscal policy

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  • Tanaka, Yasuhito

Abstract

Using two types of overlapping generations (OLG) model, we show that involuntary unemployment is in a Nash equilibrium of a game with a firm and consumers, and we can achieve full-employment by fiscal policy financed by seignorage not tax. Once we achieve it, it is maintained without government expenditure. Also we show that a fall in the nominal wage rate may not decrease involuntary unemployment.

Suggested Citation

  • Tanaka, Yasuhito, 2020. "Involuntary unemployment as a Nash equilibrium and fiscal policy," MPRA Paper 102049, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:102049
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    File URL: https://mpra.ub.uni-muenchen.de/102049/1/MPRA_paper_102049.pdf
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    References listed on IDEAS

    as
    1. Otaki, Masayuki, 2007. "The dynamically extended Keynesian cross and the welfare-improving fiscal policy," Economics Letters, Elsevier, vol. 96(1), pages 23-29, July.
    2. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    3. Marc Lavoie, 2001. "Efficiency Wages in Kaleckian Models of Employment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(3), pages 449-464, March.
    4. Yasuhito Tanaka, 2020. "Involuntary unemployment with indivisible labor supply under perfect competition," Economics Bulletin, AccessEcon, vol. 40(3), pages 1914-1923.
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    Cited by:

    1. Tanaka, Yasuhito, 2021. "Technical progress and involuntary unemployment under deflation with real balance effect and fiscal policy for full-employment," MPRA Paper 106714, University Library of Munich, Germany.
    2. Yasuhito Tanaka, 2020. "Involuntary unemployment in overlapping generations model due to instability of the economy," Papers 2012.12199, arXiv.org.

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    More about this item

    Keywords

    Involuntary unemployment; Nash equilibrium; Fiscal policy;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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