A Dual Economy of the New Keynesian Type with Self-Employment Included

Yoshihiro Maruyama and Tadashi Sonoda
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Yoshihiro Maruyama: University of Tsukuba
Tadashi Sonoda: Nagoya University

Chapter 7 in A Theory of the Producer-Consumer Household, 2011, pp 191-218 from Palgrave Macmillan

Abstract: Abstract Producer-consumer households organize their family firms in such a way as to maximize the welfare of their family members, while capitalist firms organize their production activity to maximize the residual profit imputable to themselves. Furthermore, they offer a higher than equilibrium rate of wage to use the resulting excess supply of labor as a device for disciplining workers (see, for example, Shapiro and Stiglitz, 1984; Yellen, 1984), while family firms of the producer-consumer households need not do so since they employ their own family members. Some members of family are employed by capitalist firms. If they are dismissed, they may either return to their family firms or start a family firm of their own. How does an economy consisting of these distinct types of producing units behave over aggregate economic fluctuations in comparison with an economy consisting of capitalist firms and worker-consumer households? A dual economy model of the New Keynesian type consisting of capitalist firms and producer-consumer households is developed to examine its behavior over the fluctuations in aggregate demand for outputs caused by the changes in investment. It turns out that the differential of wage between the capitalist and the self-employment sectors proves to be countercyclical as unemployment does so in models of economy of the regular Keynesian type consisting of capitalist firms and worker-consumer households.

Keywords: Family Firm; Aggregate Demand; Autonomous Response; Family Labor; Wage Employment (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-34668-0_7

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DOI: 10.1057/9780230346680_7

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