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Involuntary unemployment as a Nash equilibrium and fiscal policy

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  • Tanaka, Yasuhito

Abstract

Using two types of overlapping generations (OLG) model, we show that involuntary unemployment is in a Nash equilibrium of a game with a firm and consumers, and we can achieve full-employment by fiscal policy financed by seignorage not tax. Once we achieve it, it is maintained without government expenditure. Also we show that a fall in the nominal wage rate may not decrease involuntary unemployment.

Suggested Citation

  • Tanaka, Yasuhito, 2020. "Involuntary unemployment as a Nash equilibrium and fiscal policy," MPRA Paper 102049, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:102049
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    File URL: https://mpra.ub.uni-muenchen.de/102049/1/MPRA_paper_102049.pdf
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    References listed on IDEAS

    as
    1. Otaki, Masayuki, 2007. "The dynamically extended Keynesian cross and the welfare-improving fiscal policy," Economics Letters, Elsevier, vol. 96(1), pages 23-29, July.
    2. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    3. Marc Lavoie, 2001. "Efficiency Wages in Kaleckian Models of Employment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(3), pages 449-464, March.
    4. Yasuhito Tanaka, 2020. "Involuntary unemployment with indivisible labor supply under perfect competition," Economics Bulletin, AccessEcon, vol. 40(3), pages 1914-1923.
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    Cited by:

    1. Yasuhito Tanaka, 2020. "Involuntary unemployment in overlapping generations model due to instability of the economy," Papers 2012.12199, arXiv.org.
    2. Tanaka, Yasuhito, 2021. "Technical progress and involuntary unemployment under deflation with real balance effect and fiscal policy for full-employment," MPRA Paper 106714, University Library of Munich, Germany.

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    More about this item

    Keywords

    Involuntary unemployment; Nash equilibrium; Fiscal policy;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • 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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