Involuntary unemployment in overlapping generations model due to instability of the economy and fiscal policy

2021 ◽  
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Fiscal Policy ◽  
Overlapping Generations ◽  
Overlapping Generations Model ◽  
Involuntary Unemployment

scholarly journals INCOME DISTRIBUTION BY AGE GROUP AND PRODUCTIVE BUBBLES

2020 ◽  
pp. 1-31
Author(s):  
Xavier Raurich ◽  
Thomas Seegmuller
Keyword(s):  
Fiscal Policy ◽  
Overlapping Generations ◽  
Consumption Smoothing ◽  
Age Group ◽  
Overlapping Generations Model ◽  
Aggregate Production ◽  
Speculative Bubbles ◽  
Intertemporal Consumption ◽  
Distribution Of Income

The aim of this paper is to study the role of the distribution of income by age group on the existence of speculative bubbles. A crucial question is whether this distribution may promote a bubble associated to a larger level of capital, that is a productive bubble. We address these issues in an overlapping generations model where agents live three periods and productive investment done in the first period of life is an illiquid investment whose return occurs in the following two periods. A bubble is a liquid speculative investment that facilitates intertemporal consumption smoothing. We show that the distribution of income by age group determines both the existence and the effect of bubbles on aggregate production. We also show that fiscal policy, by changing the distribution of income, may facilitate or prevent the existence of bubbles and may also modify the effect that bubbles have on aggregate production.

Involuntary Unemployment as a Nash Equilibrium and Fiscal Policy for Full Employment

2021 ◽  
pp. 2150018
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Nash Equilibrium ◽  
Fiscal Policy ◽  
Budget Deficit ◽  
Full Employment ◽  
Aggregate Demand ◽  
Fiscal Policies ◽  
Budget Deficits ◽  
Overlapping Generations Model ◽  
Involuntary Unemployment ◽  
Game Theoretic

This study aimed to provide a game-theoretic interpretation of the analyses of involuntary unemployment by deficiency of aggregate demand and fiscal policy to achieve full employment using an overlapping generations model. We showed that involuntary unemployment is in a Nash equilibrium of a game with a firm and consumers. Moreover, we showed that full employment can be achieved through fiscal policies that create budget deficits in recessionary conditions with involuntary unemployment. Once full employment is achieved, it can be sustained without a budget deficit.

scholarly journals INDIVISIBLE LABOR SUPPLY AND INVOLUNTARY UNEMPLOYMENT: MONOPOLISTIC COMPETITION MODEL

2020 ◽  
pp. 1-14
Author(s):  
YASUHITO TANAKA
Keyword(s):  
Labor Supply ◽  
Utility Maximization ◽  
Overlapping Generations ◽  
Monopolistic Competition ◽  
Returns To Scale ◽  
Profit Maximization ◽  
Wage Rigidity ◽  
Overlapping Generations Model ◽  
Involuntary Unemployment ◽  
Constant Returns To Scale

This paper is an attempt to provide a micro-theoretical basis for Keynesian economics while maintaining as much of the neoclassical framework as possible, such as utility maximization for consumers and profit maximization for firms. We show the existence of involuntary unemployment without assuming wage rigidity when labor supplies of individuals are indivisible. We derive involuntary unemployment using an overlapping generations model under monopolistic competition with constant returns to scale technology and indivisible labor supply.

scholarly journals Negative Real Balance Effects in the Presence of Involuntary Unemployment

Ekonomika ◽  
2021 ◽  
Vol 100 (1) ◽  
pp. 54-66
Author(s):  
Yasuhito Tanaka
Keyword(s):  
Wage Rate ◽  
Overlapping Generations ◽  
Pension System ◽  
The Other ◽  
Nominal Wage ◽  
Positive Real ◽  
Overlapping Generations Model ◽  
Real Balance ◽  
Involuntary Unemployment ◽  
Younger Generation

We examine positive or negative real balance effect (or so-called Pigou effect) by falls in the nominal wage rate and the prices of the goods in situations where there is involuntary unemployment using a three-generations overlapping generations model with childhood period and pay-as-you go pension system for the older generation consumers. We will show that if the net savings of the younger generation consumers are larger than their debts due to consumption in their childhood period, there exists positive real balance effect and the employment increases by a fall in the nominal wage rate; on the other hand, if the net savings of the younger generation consumers are smaller than their debts, there exists negative real balance effect and the employment decreases by a fall in the nominal wage rate.

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