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Existence of Involuntary Unemployment: the Role of Expectations and Feedback Effects

Author

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  • Lasselle, L.
  • Svizzero, S.

Abstract

We investigate the existence conditions of involuntary unemployment in an overlapping generations model with an imperfect output market. At the temporary equilibrium, unemployment is involuntary if it exists whatever the nominal wage. The study of the price-elasticity components gives us two results. Firstly, under backward-looking expectations, it may always appear whatever feedback effects. Secondly, under rational expectations, it may only exist as soon as firms incorporate (even partly) profit feedback effects.

Suggested Citation

  • 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.
    • Handle: RePEc:fth:aixmeq:96a30
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    Cited by:

    1. Laurence S. Lasselle & Serge A. Svizzero, 2002. "Involuntary Unemplyment in Imperfectly Competitive General Equilibrium Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 487-507, September.

    More about this item

    Keywords

    UNEMPLOYMENT; EXPECTATIONS;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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