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Divisibility and indivisibility of labor supply, and involuntary unemployment: A monopolistic competition model with homothetic preferences

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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 monopolistic competition with increasing or constant returns to scale technology and homothetic preferences of consumers. 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 monopolistic competition model with homothetic preferences," MPRA Paper 98406, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98406
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    References listed on IDEAS

    as
    1. Tanaka, Yasuhito, 2019. "Indivisible labor supply and involuntary unemployment: Increasing returns to scale case," MPRA Paper 97378, University Library of Munich, Germany.
    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. Yasuhito Tanaka, 2023. "Indivisible Labor Supply And Involuntary Unemployment: Monopolistic Competition Model," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 68(06), pages 1953-1966, December.
    4. 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.
    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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    involuntary unemployment; monopolistic 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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