The expansion path for industry employment under perfect competition in long-run equilibrium

Gregg Frasco

Applied Economics Letters, 2002, vol. 9, issue 12, 801-803

Abstract: Beginning from long-run equilibrium under perfect competition, an increase in the wage due to an upward shift in labour supply generates negative profits. In order for long-run equilibrium to be restored, the price of output must increase. This causes the marginal revenue product curve for labour to shift upward. Consequently, even though the wage is higher, it is possible for the firm to end up employing a larger quantity of labour. This raises the following question. After the wage increases due to an upward shift in labour supply, is it possible, in long-run equilibrium, for industry employment of labour to increase? The concavity of the long-run equilibrium input demand functions is used to prove that industry employment will indeed decrease. Hence conventional analysis is proved to be correct.

Date: 2002
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:9:y:2002:i:12:p:801-803

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504850210135219

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().