On Modelling the Natural Rate of Unemployment with Indivisible Labour

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On Modelling the Natural Rate of Unemployment with Indivisible Labour

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Jeremy Greenwood
Gregory W. Huffman

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Abstract

This analysis investigates modeling the natural rate of unemployment in settings wh ere labor's utilization has some lumpy aspect to it. Specifically, th e introduction of various nonconvexities into tastes and technology l ead to unemployment in general equilibrium. Equilibria can emerge whe re (1) those currently unemployed have higher probabilities of being unemployed in the future than those currently employed; (2) some agen ts are jobless while others work overtime; and (3) seniority rules se emingly arise whereby old workers cannot be laid off so long as eithe r new workers are being hired or some workers are doing overtime. The relative welfare levels of employed and unemployed agents are analyz ed.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 21 (1988)
Issue (Month): 3 (August)
Pages: 587-609
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Handle: RePEc:cje:issued:v:21:y:1988:i:3:p:587-609

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Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1990. "Homework In Macroeconomics I: Basic Theory," Working Papers 90-17, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
Karl Shell & Randall Wright, 1991. "Indivisibilities, lotteries, and sunspot equilibria," Staff Report 133, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- Shell, Karl & Wright, Randall, 1993. "Indivisibilities, Lotteries, and Sunspot Equilibria," Economic Theory, Springer, vol. 3(1), pages 1-17, January.
Basu, Parantap & Marsiliani, Laura & Renström, Thomas I, 2004. "Optimal Dynamic Taxation with Indivisible Labour," CEPR Discussion Papers 4190, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Jess Benhabib & Randall Wright & Richard Rogerson, 1990. "Homework in Macoreconomics I: Basic Theory (Part I of II)," NBER Working Papers 3344, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Parantap Basu & Thomas Renstrom, . "When to Tax Labor?," Wallis Working Papers WP28, University of Rochester - Wallis Institute of Political Economy. [Downloadable!]
Thomas Renstrom & Parantap Basu, 2004. "Optimal dynamic taxation with indivisible labor," Money Macro and Finance (MMF) Research Group Conference 2003 78, Money Macro and Finance Research Group. [Downloadable!]
Other versions:
- Parantap Basu & Laura Marsiliani & Thomas I. Renström, 2004. "Optimal Dynamic Taxation with Indivisible Labour," Manchester School, University of Manchester, vol. 72(s1), pages 34-54, 09. [Downloadable!] (restricted)
Basu, Parantap & Renström, Thomas I, 2002. "When to Tax Labour?," CEPR Discussion Papers 3456, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

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