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

Tanaka, Yasuhito (2020): Divisibility and indivisibility of labor supply, and involuntary unemployment: A monopolistic competition model with homothetic preferences.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: involuntary unemployment, monopolistic competition, divisible labor supply.
• 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

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