Tanaka, Yasuhito (2020): Fiscal policy under involuntary unemployment.
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Abstract
We show the existence of involuntary unemployment based on consumers' utility maximization and firms' profit maximization behavior under monopolistic competition with increasing, decreasing or constant returns to scale technology using a three-periods overlapping generations (OLG) model with a childhood period as well as younger and older periods. We also analyze the effects of fiscal policy financed by tax and budget deficit (or seigniorage) to realize full-employment under a situation with involuntary unemployment. We show the following results. 1) In order to maintain the steady state where employment increases at some positive rate, we need a budget deficit. Therefore, we need budget deficit to realize full-employment from a state with involuntary unemployment (Proposition 1). 2) If the full-employment state is realized, we do not need budget deficit to maintain full-employment (Proposition 2). Additionally we present a game-theoretic interpretation of involuntary unemployment and full-employment.
Item Type: | MPRA Paper |
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Original Title: | Fiscal policy under involuntary unemployment |
Language: | English |
Keywords: | Involuntary unemployment, Three-periods overlapping generations model, Monopolistic competition, Nash equilibrium |
Subjects: | E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity |
Item ID: | 102507 |
Depositing User: | Yasuhito Tanaka |
Date Deposited: | 23 Aug 2020 20:27 |
Last Modified: | 23 Aug 2020 20:27 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/102507 |
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