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On Monopolistic Competition and Involuntary Unemployment

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  • d'Aspremont, Claude
  • Dos Santos Ferreira, Rodolphe
  • Gerard-Varet, Louis-Andre

Abstract

In a simple temporary general equilibrium model, it is shown that, if the number of firms is small, imperfect price competition in the markets for goods may be responsible for the existence of unemployment at any given positive wage. In the authors' examples involving two firms facing their "true" demand curves, total monopolistic labor demand remains bounded as the wage rate goes to zero and unemployment prevails for a sufficiently large inelastic labor supply. In the competitive case, total labor demand would go to infinity and intersect labor supply at a positive wage. Copyright 1990, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 105 (1990)
Issue (Month): 4 (November)
Pages: 895-919

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Handle: RePEc:tpr:qjecon:v:105:y:1990:i:4:p:895-919

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2004. "Wage Flexibility and Unemployment: The Keynesian Perspective Revisited," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(5), pages 654-674, November.
  2. d'ASPREMONT, C. & DOS SANTOS FERREIRA, R. & ÉRARD-VARET, L.-A., . "General equilibrium concepts under imperfect competition: a Cournotian approach," CORE Discussion Papers RP -1259, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," MAGKS Papers on Economics 200907, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. repec:dgr:uvatin:2006041 is not listed on IDEAS
  5. Pasquale Commendatore & Ingrid Kubin, 2005. "Dynamic Effects of Regulation and Deregulation in Goods and Labour Markets," Working Papers geewp49, Vienna University of Economics Research Group: Growth and Employment in Europe: Sustainability and Competitiveness.
  6. Ludovic A. JULIEN, 2009. "Unemployment equilibrium and economic policy in mixed markets," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009030, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Foellmi, Reto & Zweimüller, Josef, 2006. "Mass Consumption, Exclusion and Unemployment," CEPR Discussion Papers 5824, C.E.P.R. Discussion Papers.
  8. Amedeo Panci, 1999. "Multiple equilibria: coordination failure and endogenous cycle," Working Papers 30, University of Rome La Sapienza, Department of Public Economics.
  9. André Zylberberg, 1990. "Salaires et emploi dans une économie de partage," Économie et Prévision, Programme National Persée, vol. 92(1), pages 153-160.
  10. Murata, Yasusada, 2002. "Rural-urban interdependence and industrialization," Journal of Development Economics, Elsevier, vol. 68(1), pages 1-34, June.
  11. Reto Foellmi & Josef Zweimüller, 2010. "Mass versus Exclusive Goods, and Formal-Sector Employment," Diskussionsschriften dp1005, Universitaet Bern, Departement Volkswirtschaft.

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