scholarly journals A misinterpretation of Keynes’s concept of involuntary unemployment

Equilibrium ◽  
2018 ◽  
Vol 13 (2) ◽  
pp. 331-348
Author(s):  
Roy H. Grieve
Keyword(s):  
Labour Supply ◽  
Present Note ◽  
Labour Force ◽  
Aggregate Demand ◽  
Supply Side ◽  
Policy Makers ◽  
Macroeconomic Theory ◽  
Involuntary Unemployment ◽  
Response To Change ◽  
Extreme View

Research background: One of the principal contributions of Maynard Keynes’s General Theory was identification of the phenomenon of involuntary unemployment, due (on account of adverse expectations and confidence on the part of potential buyers) to a want of demand for the quantity of output which a fully-employed labour force was capable of producing.  Such unemployment, he insisted — contrary to conventional opinion — was not due to workers pricing themselves out of work by demanding wages higher than employers could afford.  Far from unemployed workers being themselves responsible for their plight, they were, in reality, victims of circumstances beyond their control. Keynes’s understanding was, for many years, widely accepted by academics, policy-makers and the general public. In recent times, however, mainstream macroeconomic theory has shown a regrettable tendency to return to old modes of thinking. Blame for unemployment is again put on the workforce, whose alleged misunderstanding or slow response to change are said to imply seeking employment on unrealistic terms. A more extreme view is that worklessness may reflect a deliberate choice of leisure. To anyone sceptical of the validity of such analyses there is a clear need to recover the Keynesian understanding of the possibility not just of frictional or voluntary, but also of involuntary unemployment.  Purpose of the article:  Ezra Davar, recognising that it is important not to lose sight of the idea of involuntary unemployment, has recently attempted in this Journal to explain Keynes’s concept. Unfortunately, however, he fails to recognise that Keynes accounted for involuntary unemployment as resulting from deficiency of aggregate demand for output, not as  the consequence of any supply-side factor. In attributing involuntary unemployment to a peculiarity in the labour supply function Davar quite misses Keynes’s point, and in fact identifies as involuntary unemployment a situation of what Keynes would have described as “voluntary” employment. The objective of the present note is to clear up this misunderstanding.

scholarly journals Women’s Vulnerability to the Economic Crisis through the Lens of Part-time Work in Spain

2021 ◽  
pp. 095001702110012
Author(s):  
Valeria Insarauto
Keyword(s):  
Economic Crisis ◽  
Labour Supply ◽  
Labour Force ◽  
Gender Norms ◽  
Transmission Mechanism ◽  
Female Employment ◽  
Time Work ◽  
Part Time ◽  
Part Time Work

This article studies women’s vulnerability to the economic crisis of 2008 through the lens of part-time work in Spain. It posits that part-time work made the female employment position more fragile by acting as a transmission mechanism of traditional gender norms that establish women as secondary workers. This argument is tested through an analysis of Labour Force Survey data from 2007 to 2014 that examines the influence of the employment situation of the household on women’s part-time employment patterns. The results expose the limited take-up of part-time work but also persistent patterns of involuntariness and underemployment corresponding to negative household employment situations, highlighting the constraining role of gender norms borne by the relative position of part-time work in the configuration of employment structures. The article concludes that, during the crisis, part-time work participated in the re-establishment of women as a family dependent and flexible labour supply, increasing their vulnerability.

The End of Sharecropping in Central Italy after 1945: The Role of Mechanisation in the Changing Relationship between Peasant Families and Land

Rural History ◽  
2014 ◽  
Vol 25 (2) ◽  
pp. 243-260 ◽  
Author(s):  
STUART OGLETHORPE
Keyword(s):  
Labour Supply ◽  
Labour Force ◽  
Central Italy ◽  
Rural Landscape ◽  
Rapid Decline ◽  
Farming Families ◽  
Political Economic ◽  
The Relationship ◽  
Push Factor

Abstract:This article focuses on the mechanisation of agriculture in central Italy in the thirty years or so after 1945. This provides a particular way of examining the major changes in the rural landscape in this period, especially the end of the sharecropping system. Land in these regions had for centuries been predominantly farmed under sharecropping contracts, but for political, economic, and demographic reasons this system, which had inhibited modernisation, entered a rapid decline. Whereas labour supply had previously exceeded demand, the reverse became the case, allowing sharecropping families more freedom in how they operated. Mechanisation was not a ‘push’ factor, but as the agricultural labour force contracted it was a necessary response. The article uses individual testimony to illustrate how tenant farmers started to work outside the sharecropping contract, some becoming outside contractors with other farms and supplying tractor hire. The mechanisation of agriculture was slow and uneven, but marked an irreversible change in the relationship between farming families and their land.

The Effect of New Deal Policies Revisited

2020 ◽  
Author(s):  
Yangyang Ji
Keyword(s):  
New Deal ◽  
Aggregate Demand ◽  
American Economic Review ◽  
Supply Side ◽  
Natural Rate ◽  
Jel Codes ◽  
The Great Depression ◽  
Us Economy ◽  
The Us ◽  
The New Deal

Abstract Eggertsson (2012, American Economic Review, 102, 524–55) finds that when the nominal interest rate hits the zero lower bound, the aggregate demand (AD) curve becomes upward-sloping and supply-side policies that reduce the natural rate of output, such as the New Deal implemented in the 1930s, are expansionary. His analysis is restricted to a conventional equilibrium where the AD curve is steeper than the aggregate supply (AS) curve. Recent research, however, demonstrates that an alternative equilibrium arises if the AD curve is flatter than the AS curve. In that case, the same policies become contractionary. In this article, I allow for both possibilities, and let data decide which equilibrium the US economy actually resided in during the Great Depression. Following the work of Blanchard and Quah (1989, American Economic Review, 79, 655–73), I find that there is a high probability that New Deal policies were contractionary. (JEL codes: E32, E52, E62, N12).

scholarly journals Central banking, protectionism and globalization

2019 ◽  
Vol 69 (s1) ◽  
pp. 121-140
Author(s):  
Jacob A. Frenkel
Keyword(s):  
Global Financial Crisis ◽  
The United States ◽  
Central Banking ◽  
Policy Response ◽  
Implicit Assumption ◽  
Economic Policies ◽  
New Paradigm ◽  
Macroeconomic Policies ◽  
Policy Makers ◽  
Macroeconomic Theory

The recent global financial crisis has resulted in a new creative set of economic policies. The justifi- cation for the unconventional policy response was based on the implicit assumption that the departure from the norms of macroeconomic policies would be temporary. This detour has lasted longer than expected. Now that the process of normalization has started in the United States and is likely to be followed (albeit in some delay) in Europe, it would be important for policy makers to emphasize that the unconventional set of economic policies were just a detour from the longstanding convention rather than representing a new paradigm. The experience of the crisis and the post-crises years should be recorded in history as refl ecting a period during which new and important policy chapters were drafted. These chapters should be added to the corpus of knowledge of macroeconomic theory and policy. The new chapters contain important lessons that should definitely not be forgotten once the crisis is over. They should be added to, but not replace, the old textbooks.

scholarly journals Technological Progress, Globalization, and Secular Stagnation

2018 ◽  
Vol 7 (1) ◽  
pp. 59-100 ◽  
Author(s):  
Milenko Popović
Keyword(s):  
World Economy ◽  
Aggregate Demand ◽  
Careful Analysis ◽  
Developed Countries ◽  
Supply Side ◽  
Critical Survey ◽  
Technological Advancement ◽  
Secular Stagnation ◽  
Dual Economy ◽  
The Usa

AbstractAfter the 2008 crisis, despite economic recovery that started in 2009, the world economy has experienced a downward shift of its growth path and a consequent decline. As shown at the beginning of this paper, this shift and growth rate stagnation are totally attributable to the economic dynamics in developed economies, the USA and the EU. Explanations of this phenomenon can be divided into two large groups: explanations that belong to the demand side and those that belong to the supply side. The aim of this paper is to give a critical survey of the most important explanations for the ongoing growth stagnation in developed countries and consequently in the entire world economy. This ongoing prolonged stagnation can only be explained by looking at both, the demand and supply sides of the explanation, and particularly by taking a closer look at the interaction between aggregate demand and aggregate supply. In other words, secular stagnation manifests itself as a problem of the limitation of long run growth of aggregate demand. However, in order to explain the causes of those demand limitations, we have to undertake a careful analysis of the supply side dynamics, especially the dynamics of innovations, which bring us to circular and cumulative causation. In order to explain the numerous consequences of this stagnation and to solve some important puzzles, like the productivity paradox for example, a special emphasis is given to the analysis of deindustrialization and the consequent strange reoccurrence of a dual economy within most developed countries during the period of the IT revolution and hyper-globalization. It will also be shown that this new dual economy presents serious limitations for further technological advancement and economic development, quite contrary to the old dualism which contributed to an acceleration of economic growth.

Life-cycle choices and risk

2018 ◽  
Author(s):  
Hans Fehr ◽  
Fabian Kindermann
Keyword(s):  
Decision Making ◽  
Life Cycle ◽  
Portfolio Choice ◽  
Labour Supply ◽  
Labour Force ◽  
Labour Productivity ◽  
Precautionary Savings ◽  
Longevity Risk ◽  
Future Earnings ◽  
Participation Decision

The optimal savings and investment decisions of households along the life cycle were a central issue in Chapter 5. There, savings decisions were made under various forms of risks.However, we restricted our analysis to three period models owing to the limitations of the numerical all-in-one solution we used. In this chapter we want to take a different approach. Applying the dynamic programming techniques learned so far allows us to separate decision-making at different stages of the life cycle into small sub-problems and therefore increase the number of periods we want to look at enormously. This enables us to take amuchmore detailed look at how life-cycle labour supply, savings, and portfolio choice decisions are made in the presence of earnings, investment, and longevity risk. Unlike in Chapter 9, the models we study here are partial equilibrium models. Hence, all prices as well as government policies are exogenous and do not react to changes in household behaviour. This chapter is split into two parts. The first part focuses on labour supply and savings decisions in the presence of labour-productivity and longevity risk. Insurance markets against these risks are missing, such that households will try to self-insure using the only savings vehicle available, a risk-free asset. This model is a quite standard workhorse model in macroeconomics and a straightforward general equilibrium extension exists, the overlapping generations model, which we study in Chapter 11. In the second part of the chapter, we slightly change our viewpoint and look upon the problem of life-cycle decision-making from a financial economics perspective. We therefore exclude laboursupply decisions, but focus on the optimal portfolio choice of households along the life cycle, when various forms of investment vehicles like bonds, stocks, annuities, and retirement accounts are available. This section is devoted to analysing consumption and savings behaviour when households face uncertainty about future earnings and the length of their life span. We study how households can use precautionary savings in a risk-free asset as a means to selfinsure against the risks they face. While in our baseline model we assume that agents always work full-time, we relax this assumption later on by considering a model with endogenous labour supply as well as a model with a labour-force participation decision of second earners within a family context.

Working for Free

2018 ◽  
pp. 167-196
Author(s):  
Jon W. Anderson
Keyword(s):  
Information Technologies ◽  
National Policy ◽  
Rent Seeking ◽  
Value Orientations ◽  
The Internet ◽  
Supply Side ◽  
Policy Makers ◽  
Micro Level ◽  
Marginal Returns ◽  
Share Value

While freedom dividends from spreading the Internet specifically and information technologies more generally across the Arab Middle East have proven problematic, hopes for economic dividends endure throughout the spectrum from national policy-makers to developers and users in nearly all countries in the region. Enthusiasms for investment in Internet and IT generally have rested on broad supply-side orientations at macro levels that do not link with the actual sociology of IT development, deployment and use at more micro levels, where returns to working on and through the Internet have been elusive. This chapter focuses on Internet developers as the missing link and identifies factors from piracy to strategies for pursuing returns by selling the firm rather than the product and forms of rent-seeking that add problems of getting paid to practices in which IT workers elsewhere have been found to share value orientations of entrepreneurial IT firms, while value is extracted upward and marginal returns on primary production fall at the micro level and fail to register as productivity at the macro level.

Labour supply dynamics at the extensive and intensive margins of the UK men and women

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lixin Cai
Keyword(s):  
Labour Supply ◽  
Labour Force ◽  
State Dependence ◽  
Labour Force Participation ◽  
Tobit Model ◽  
The State ◽  
Individual Heterogeneity ◽  
Content Type ◽  
Extensive And Intensive Margins ◽  
The Uk

PurposeThe purpose of this study is to enhance understanding labour supply dynamics of the UK workers by examining whether and to what extent there is state dependence in the labour supply at both the extensive and intensive margins.Design/methodology/approachA dynamic two-tiered Tobit model is applied to the first seven waves of Understanding Society: the UK Household Longitudinal Study. The model used accounts for observed and unobserved individual heterogeneity and serially correlated transitory shocks to labour supply to draw inferences on state dependence.FindingsThe results show that both observed and unobserved individual heterogeneity contributes to observed inter-temporal persistence of the labour supply of the UK workers, and the persistence remains after these factors are controlled for, suggesting true state dependence at both the extensive and intensive margins of the labour supply. The study also finds that at both the margins, the state dependence of labour supply is larger for females than for males and that for both genders the state dependence is larger for people with low education, mature aged workers and people with long-standing illness or impairment. The results also show that estimates from a conventional Tobit model may produce misleading inferences regarding labour supply at the extensive and intensive margins.Originality/valueThis study adds to the international literature on labour supply dynamics by providing empirical evidence for both the extensive and intensive margins of labour supply, while previous studies tend to focus on the extensive margin of labour force participation only. Also, unlike earlier studies that often focus on females, this study compares labour supply dynamics between males and females. The study also compares the estimates from the more flexible two-tiered Tobit model with that from the conventional Tobit model.

Labour supply behaviour of married women in Toronto

2016 ◽  
Vol 43 (3) ◽  
pp. 418-431 ◽  
Author(s):  
Wasanthi Thenuwara ◽  
Bryan Morgan
Keyword(s):  
Labour Supply ◽  
Labour Force ◽  
Estimation Procedure ◽  
Married Women ◽  
Least Square ◽  
Step Method ◽  
Content Type ◽  
Supply Elasticity ◽  
Using Data ◽  
The Unemployed

Purpose – The purpose of this paper is to investigate the connection between labour supply and the wages of married women of different ages in Toronto using data from the 2010 Labour Force Survey of Canada. Design/methodology/approach – The authors employ three econometric techniques, ordinary least square, 2 stage least square and the Heckman two-step method to estimate the supply elasticities. The first two focus on the wage rate and hours conditional on the subjects being employed whereas the third method controls for sample selectivity bias by including the unemployed. Bootstrap test statistics are produced when the normality assumption for the error terms is found to be violated. Findings – The aggregate labour supply elasticity for married women in Toronto is estimated to be 0.053 which similar to value found for Canada for a whole in a previous study even though Toronto is much more diverse culturally than average. The labour supply elasticities for 25-34 year old and 35-44 year old married are estimated to be 0.108 and 0.079, respectively. The supply elasticity for married women aged 45-59 is not significantly different from 0. Originality/value – The paper shows that younger married women in Toronto are more responsive to an increase in wages than older women. The estimation procedure and the testing of the significance of coefficients are more rigorous than previous studies.

Estimating Labour Supply in Policy-Oriented Regional Planning Models

1992 ◽  
Vol 24 (12) ◽  
pp. 1781-1797 ◽  
Author(s):  
D E Fuller
Keyword(s):  
Population Structure ◽  
Regional Planning ◽  
Labour Supply ◽  
Traditional Approach ◽  
Labour Force ◽  
Labour Demand ◽  
Regional Models ◽  
Demand And Supply ◽  
Planning Models ◽  
The Relationship

The importance of integrating policies concerned with the demand and supply of labour within growing regions has long been recognized. However, there are important theoretical deficiencies associated with orthodox methods. In the traditional approach to operational urban and regional models it is claimed that the relationship between labour demand and labour supply is functional and one sided, that is, the growth of labour demand causes population growth and leads to an assured level of labour supply. However it is argued that in the development of regional labour-force policies aimed at recognized objectives, estimates of the number and characteristics of persons available to the labour force are at least as important as estimates of the structure of labour demand. A change in the traditional theoretical framework is therefore necessary to allow for the influence of a particular population structure upon the supply of labour—in aggregate as well as to different occupational submarkets. Presentation of a more independent treatment of methods aimed at estimating the ‘availability’ (and the ‘requirements’) of labour also allows for the possibility, and consequences, of imbalance in the labour market to be recognized.

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