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Involuntary Unemployment in a Competitive Labour Market

  • Gangolf Groh


    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

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    High an persistent unemployment, especially in the sector of low-skilled work, is usually attributed to the presence of minimum wages or unemployment benefits creating a reservation wage at wich labour demand of firms is insufficient. While not refusing this view this paper argues that also without these obstacles a situation is likely to occur which is similar to unemployment and in a rigorous sense even worse: people not finding a job in the sector of "honest work" at a wages sufficient to meet minimum consumption are forced to recourse to less desirable activities. The topic is analyzed in an OLG-context with two working periods for each generation.

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    File Function: First version, 2007
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    Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 07009.

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    Length: 33 pages
    Date of creation: Feb 2007
    Date of revision:
    Handle: RePEc:mag:wpaper:07009
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