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Divisibility and indivisibility of labor supply, and involuntary unemployment: A perfect competition model

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  • Tanaka, Yasuhito

Abstract

We show the existence of involuntary unemployment without assuming wage rigidity. We derive involuntary unemployment by considering utility maximization of consumers and profit maximization of firms in an overlapping generations model under perfect competition with decreasing or constant returns to scale technology. Indivisibility of labor supply may be a ground for the existence of involuntary unemployment. However, we show that under some conditions there exists involuntary unemployment even when labor supply is divisible.

Suggested Citation

  • Tanaka, Yasuhito, 2020. "Divisibility and indivisibility of labor supply, and involuntary unemployment: A perfect competition model," MPRA Paper 98405, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98405
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    References listed on IDEAS

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    1. Masayuki Otaki, 2015. "Price Theory in a Monetary Economy," Advances in Japanese Business and Economics, in: Keynesian Economics and Price Theory, edition 127, chapter 2, pages 15-41, Springer.
    2. Otaki, Masayuki, 2007. "The dynamically extended Keynesian cross and the welfare-improving fiscal policy," Economics Letters, Elsevier, vol. 96(1), pages 23-29, July.
    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. Otaki, Masayuki, 2009. "A welfare economics foundation for the full-employment policy," Economics Letters, Elsevier, vol. 102(1), pages 1-3, January.
    5. Masayuki Otaki, 2016. "Keynes’s General Theory Reconsidered in the Context of the Japanese Economy," SpringerBriefs in Economics, Springer, number 978-4-431-55915-3, June.
    6. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
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    Cited by:

    1. Yasuhito Tanaka, 2021. "A Mathematical Model of MMT (Modern Monetary Theory) with Profit Return," Business and Economic Research, Macrothink Institute, vol. 11(4), pages 39-55, December.
    2. Yasuhito Tanaka, 2021. "Very Simple Mathematical Model of MMT (Modern Monetary Theory)," Business and Economic Research, Macrothink Institute, vol. 11(3), pages 78-87, December.

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    More about this item

    Keywords

    involuntary unemployment; perfect competition; divisible labor supply;
    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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