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On Monopolistic Competition and Involuntary Unemployment

Author

Listed:
  • Claude d'Aspremont
  • Rodolphe Dos Santos Ferreira
  • Louis-André Gérard-Varet

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 our 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.

Suggested Citation

  • Claude d'Aspremont & Rodolphe Dos Santos Ferreira & Louis-André Gérard-Varet, 1990. "On Monopolistic Competition and Involuntary Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 895-919.
  • Handle: RePEc:oup:qjecon:v:105:y:1990:i:4:p:895-919.
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    Cited by:

    1. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1997. "General Equilibrium Concepts under Imperfect Competition: A Cournotian Approach," Journal of Economic Theory, Elsevier, vol. 73(1), pages 199-230, March.
    2. 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.
    3. Claude d’Aspremont & Rodolphe Dos Santos Ferreira, 2016. "Oligopolistic vs. monopolistic competition: Do intersectoral effects matter?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(1), pages 299-324, June.
    4. Julien, Ludovic A., 2011. "Unemployment equilibrium and economic policy in mixed markets," Economic Modelling, Elsevier, vol. 28(4), pages 1931-1940, July.
    5. André Zylberberg, 1990. "Salaires et emploi dans une économie de partage," Économie et Prévision, Programme National Persée, vol. 92(1), pages 153-160.
    6. Maarten C.W. Janssen, 2006. "Microfoundations," Tinbergen Institute Discussion Papers 06-041/1, Tinbergen Institute.
    7. Reto Foellmi & Josef Zweimüller, 2010. "Mass versus Exclusive Goods, and Formal-Sector Employment," Diskussionsschriften dp1005, Universitaet Bern, Departement Volkswirtschaft.
    8. repec:eee:reecon:v:71:y:2017:i:4:p:729-739 is not listed on IDEAS
    9. 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).
    10. Murata, Yasusada, 2002. "Rural-urban interdependence and industrialization," Journal of Development Economics, Elsevier, vol. 68(1), pages 1-34, June.
    11. Foellmi, Reto & Zweimüller, Josef, 2006. "Mass Consumption, Exclusion and Unemployment," CEPR Discussion Papers 5824, C.E.P.R. Discussion Papers.
    12. repec:spo:wpecon:info:hdl:2441/6763 is not listed on IDEAS
    13. 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.
    14. Amedeo Panci, 1999. "Multiple equilibria: coordination failure and endogenous cycle," Working Papers 30, University of Rome La Sapienza, Department of Public Economics.
    15. d’Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2017. "The Dixit–Stiglitz economy with a ‘small group’ of firms: A simple and robust equilibrium markup formula," Research in Economics, Elsevier, vol. 71(4), pages 729-739.
    16. Rankin, Neil, 1995. "Money in Hart's model of imperfect competition," European Journal of Political Economy, Elsevier, vol. 11(3), pages 557-575, September.

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