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On monopolistic competition and involuntary unemployment

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  • d'ASPREMONT, Claude
  • DOS SANTOS FERREIRA, Rodolphe
  • GERARD-VARET, Louis-André

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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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -909.

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Handle: RePEc:cor:louvrp:-909

Note: In : The Quarterly Journal of Economics, 105(4), 895-919, 1990
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Cited by:
  1. Pasquale Commendatore & Ingrid Kubin, 2009. "Dynamic effects of regulation and deregulation in goods and labour markets," Oxford Economic Papers, Oxford University Press, vol. 61(3), pages 517-537, July.
  2. André Zylberberg, 1990. "Salaires et emploi dans une économie de partage," Économie et Prévision, Programme National Persée, vol. 92(1), pages 153-160.
  3. Amedeo Panci, 1999. "Multiple equilibria: coordination failure and endogenous cycle," Working Papers 30, University of Rome La Sapienza, Department of Public Economics.
  4. 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).
  5. Maarten C.W. Janssen, 2006. "Microfoundations," Tinbergen Institute Discussion Papers 06-041/1, Tinbergen Institute.
  6. Murata, Yasusada, 2002. "Rural-urban interdependence and industrialization," Journal of Development Economics, Elsevier, vol. 68(1), pages 1-34, June.
  7. Julien, Ludovic A., 2011. "Unemployment equilibrium and economic policy in mixed markets," Economic Modelling, Elsevier, vol. 28(4), pages 1931-1940, July.
  8. Foellmi, Reto & Zweimüller, Josef, 2006. "Mass Consumption, Exclusion and Unemployment," CEPR Discussion Papers 5824, C.E.P.R. Discussion Papers.
  9. Reto Foellmi & Josef Zweimüller, 2010. "Mass versus Exclusive Goods, and Formal-Sector Employment," Diskussionsschriften dp1005, Universitaet Bern, Departement Volkswirtschaft.
  10. Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," Working Papers 90/09, University of Southern Denmark, Department of Environmental and Business Economics.
  11. Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2001. "Wage Flexibility and Unemployment: The Keynesian Perspective Revisited," Documents de Travail de l'OFCE 2001-02, Observatoire Francais des Conjonctures Economiques (OFCE).
  12. repec:spo:wpecon:info:hdl:2441/6763 is not listed on IDEAS

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