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Involuntary Unemployment in Imperfectly Competitive General Equilibrium Models

  • Laurence Lasselle
  • Serge Svizzero

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 Gérard-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 required conditions 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.

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Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 0008.

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Date of creation: Feb 2000
Date of revision:
Handle: RePEc:san:crieff:0008
Contact details of provider: Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
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  1. Novshek, William, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 85-98, January.
  2. Bonanno, Giacomo, 1990. " General Equilibrium Theory with Imperfect Competition," Journal of Economic Surveys, Wiley Blackwell, vol. 4(4), pages 297-328.
  3. Silvestre, J., 1988. "There May Be Unemployment When The Labor Market Is Competitive And The Output Market Is Not," Papers 316, California Davis - Institute of Governmental Affairs.
  4. 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.
  5. Bénassy, Jean-Pascal, 1994. "Classical and keynesian features in macroeconomic models with imperfect competition," CEPREMAP Working Papers (Couverture Orange) 9418, CEPREMAP.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. Silvestre, Joaquim, 1993. "The Market-Power Foundations of Macroeconomic Policy," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 105-41, March.
  11. Lindbeck, Assar, 1998. "New Keynesianism and Aggregate Economic Activity," Economic Journal, Royal Economic Society, vol. 108(446), pages 167-80, January.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. Kaas, Leo, 1998. "Multiplicity of Cournot Equilibria and Involuntary Unemployment," Journal of Economic Theory, Elsevier, vol. 80(2), pages 332-349, June.
  17. Dehez, Pierre, 1985. "Monopolistic equilibrium and involuntary unemployment," Journal of Economic Theory, Elsevier, vol. 36(1), pages 160-165, June.
  18. 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.
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