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Involuntary Unemployment in Imperfectly Competitive General Equilibrium Models

  • Lasselle, Laurence S
  • Svizzero, Serge A

This paper is about "involuntary unemployment" in general equilibrium models with imperfect competition. It surveys papers written after the seminal work of d'Aspremont, Dos Santos Ferreira and Gerard-Varet (1984). This unemployment is called involuntary because it exists at any wage. It results from imperfect competition in the product markets, more specifically from firms' excessive market power. These papers have focussed their attention on the conditions required for involuntary unemployment. In our presentation, we characterise this form of unemployment through three elements: consumers' preferences, price expectations and Ford effects. Each element is important because it influences the demand for the good and hence its price elasticity, the latter being central in the definition of firms' market power. Copyright 2002 by Blackwell Publishers Ltd

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Article provided by Wiley Blackwell in its journal Journal of Economic Surveys.

Volume (Year): 16 (2002)
Issue (Month): 4 (September)
Pages: 487-507

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Handle: RePEc:bla:jecsur:v:16:y:2002:i:4:p:487-507
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  1. Michel De Vroey, 1999. "From Labor Rationing to (Involuntary) Unemployment: A Conceptual Elucidation," Eastern Economic Journal, Eastern Economic Association, vol. 25(3), pages 315-330, Summer.
  2. Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, vol. 48(2), pages 337-368, August.
  3. Lasselle, L. & Svizzero, S., 1996. "Existence of Involuntary Unemployment: the Role of Expectations and Feedback Effects," G.R.E.Q.A.M. 96a30, Universite Aix-Marseille III.
  4. Dehez, Pierre, 1985. "Monopolistic equilibrium and involuntary unemployment," Journal of Economic Theory, Elsevier, vol. 36(1), pages 160-165, June.
  5. Lindbeck, Assar, 1998. "New Keynesianism and Aggregate Economic Activity," Economic Journal, Royal Economic Society, vol. 108(446), pages 167-80, January.
  6. Novshek, William, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 85-98, January.
  7. Kaas, Leo, 1998. "Multiplicity of Cournot Equilibria and Involuntary Unemployment," Journal of Economic Theory, Elsevier, vol. 80(2), pages 332-349, June.
  8. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
  9. Christian Schultz, 1989. "The Impossibility of "Involuntary Unemployment" in an Overlapping Generations Model with Rational Expectations," Discussion Papers 89-18, University of Copenhagen. Department of Economics, revised Oct 1989.
  10. Silvestre, Joaquim, 1990. "There May Be Unemployment When the Labour Market Is Competitive and the Output Market Is Not," Economic Journal, Royal Economic Society, vol. 100(402), pages 899-913, September.
  11. Grandmont, Jean-Michel, 1993. "Temporary general equilibrium theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 19, pages 879-922 Elsevier.
  12. Hart, Oliver, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, MIT Press, vol. 97(1), pages 109-38, February.
  13. Silvestre, J., 1991. "The Market-Power Foundations of Macroeconomic Policy," Papers 374, California Davis - Institute of Governmental Affairs.
  14. BĂ©nassy, Jean-Pascal, 1994. "Classical and keynesian features in macroeconomic models with imperfect competition," CEPREMAP Working Papers (Couverture Orange) 9418, CEPREMAP.
  15. Rankin, Neil, 1992. "Imperfect Competition, Expectations and the Multiple Effects of Monetary Growth," Economic Journal, Royal Economic Society, vol. 102(413), pages 743-53, July.
  16. Lasselle, Laurence & Svizzero, Serge, 2001. "The Impossibility of Underemployment with More Than One Product Market," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 157-65, January.
  17. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1989. "Unemployment in an Extended Cournot Oligopoly Model," Oxford Economic Papers, Oxford University Press, vol. 41(3), pages 490-505, July.
  18. Bonanno, Giacomo, 1990. " General Equilibrium Theory with Imperfect Competition," Journal of Economic Surveys, Wiley Blackwell, vol. 4(4), pages 297-328.
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