Divisibility and indivisibility of labor supply, and involuntary unemployment: A monopolistic competition model with homothetic preferences

Yasuhito Tanaka

MPRA Paper from University Library of Munich, Germany

Abstract: We show the existence of involuntary unemployment without assuming wage rigidity. We derive involuntary unemployment by considering utility maximization of consumers and profit maximization of firms in an overlapping generations model under monopolistic competition with increasing or constant returns to scale technology and homothetic preferences of consumers. Indivisibility of labor supply may be a ground for the existence of involuntary unemployment. However, we show that under some conditions there exists involuntary unemployment even when labor supply is divisible.

Keywords: involuntary unemployment; monopolistic competition; divisible labor supply. (search for similar items in EconPapers)
JEL-codes: E12 E24 (search for similar items in EconPapers)
Date: 2020-01-31
New Economics Papers: this item is included in nep-mac, nep-ore and nep-upt
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