On Monopolistic Competition and Involuntary Unemployment

Claude d'Aspremont, Rodolphe Dos Santos Ferreira and Louis-André Gérard-Varet

The Quarterly Journal of Economics, 1990, vol. 105, issue 4, 895-919

Abstract: In a simple temporary general equilibrium model, it is shown that, if the number of firms is small, imperfect price competition in the markets for goods may be responsible for the existence of unemployment at any given positive wage. In our examples involving two firms facing their "true" demand curves, total monopolistic labor demand remains bounded as the wage rate goes to zero, and unemployment prevails for a sufficiently large inelastic labor supply. In the competitive case total labor demand would go to infinity and intersect labor supply at a positive wage.

Date: 1990
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Working Paper: On monopolistic competition and involuntary unemployment (1990)
Working Paper: On monopolistic competition and involuntary unemployment (1986)
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