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Effective Demand and Unemployment

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  • Andersen, Torben M

Abstract

The coordination of production and consumption decisions is analysed in a static model where the interdependence between production, income and demand is explicitly modelled. With imperfect competition and non-convex production technologies it is shown that there exists a zero pure profit equilibrium with a positive level of employment and possible involuntary employment. Finally it is shown how to arrange a form of external intervention so as to ensure full employment.

Suggested Citation

  • Andersen, Torben M, 1987. "Effective Demand and Unemployment," The Warwick Economics Research Paper Series (TWERPS) 287, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:287
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp287.pdf
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    References listed on IDEAS

    as
    1. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
    2. Oliver Hart, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(1), pages 109-138.
    3. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(3), pages 441-463.
    4. Dixon, Huw, 1987. "A Simple Model of Imperfect Competition with Walrasian Features," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 134-160, March.
    5. Benassy, Jean-Pascal, 1987. "Imperfect competition, unemployment and policy," European Economic Review, Elsevier, vol. 31(1-2), pages 417-426.
    6. Casarosa, Carlo, 1981. "The Microfoundations of Keynes's Aggregate Supply and Expected Demand Analysis," Economic Journal, Royal Economic Society, vol. 91(361), pages 188-194, March.
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