Involuntary Unemployment in Diamond-Type Overlapping Generations Models

Karl Farmer

A chapter in Macroeconomic Analysis for Economic Growth from IntechOpen

Abstract: Thus far involuntary unemployment does not occur in Diamond-type Overlapping Generations models. In line with Keynesian macroeconomics, involuntary unemployment is traced back to aggregate demand failures. While macro-economists majority refers aggregate demand failures to sticky prices, a minority attributes lacking aggregate demand to not perfectly flexible aggregate investment. The chapter investigates how an independent aggregate investment function causes involuntary unemployment under perfectly flexible competitive wage and interest rates in a Diamond-type neoclassical growth model with public debt and human capital accumulation. Moreover, it is shown that a higher public debt to output ratio enhances output growth and reduces involuntary unemployment.

Keywords: involuntary unemployment; overlapping generations models; inflexible aggregate investment; public debt; human capital accumulation (search for similar items in EconPapers)
JEL-codes: O40 (search for similar items in EconPapers)
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.intechopen.com/chapters/79417 (text/html)

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:ito:pchaps:248889

DOI: 10.5772/intechopen.101081

Access Statistics for this chapter

More chapters in Chapters from IntechOpen
Bibliographic data for series maintained by Slobodan Momcilovic ().