Involuntary Unemplyment in Imperfectly Competitive General Equilibrium Models

Laurence Lasselle and Serge A. Svizzero

Journal of Economic Surveys, 2002, vol. 16, issue 4, 487-507

Abstract: 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 conditions required 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. JEL Classification. D43, E24.

Date: 2002
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Working Paper: Involuntary Unemployment in Imperfectly Competitive General Equilibrium Models (2002)
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