Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/323098 
Year of Publication: 
2021
Citation: 
[Journal:] Ekonomika [ISSN:] 2424-6166 [Volume:] 100 [Issue:] 2 [Year:] 2021 [Pages:] 63-83
Publisher: 
Vilnius University Press, Vilnius
Abstract: 
We show the existence of involuntary unemployment based on consumers' utility maximization and firms' profit maximization behavior under monopolistic competition with increasing, decreasing or constant returns to scale technology using a three-periods overlapping generations (OLG) model with a childhood period as well as younger and older periods, and pay-as-you-go pension for the older generation, and we analyze the effects of fiscal policy financed by tax and budget deficit (or seigniorage) to achieve full-employment under a situation with involuntary unemployment. Under constant prices we show the following results. 1) If the realization of full employment will increase consumers' disposable income, in order to achieve full-employment from a state with involuntary unemployment, we need budget deficit (Proposition 1). 2) If the full-employment state has been achieved, we need balanced budget to maintain full-employment (Proposition 2). We also consider fiscal policy under inflation or deflation. Additionally, we present a game-theoretic interpretation of involuntary unemployment and full-employment. We also argue that if full employment should be achieved in equilibrium, the instability of equilibrium can be considered to be the cause of involuntary unemployment.
Subjects: 
InInvoluntary unemployment
Three-periods overlapping generations model
Monopolistic competition
Nash equilibrium
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.