Negative Real Balance Effects in the Presence of Involuntary Unemployment
Articles
Yasuhito Tanaka
Faculty of Economics, Doshisha University, Japan
Published 2021-03-25
https://doi.org/10.15388/Ekon.2021.1.3
PDF
HTML

Keywords

negative real balance effects
involuntary unemployment
three-generations overlapping generations model

How to Cite

Tanaka Y. (2021) “Negative Real Balance Effects in the Presence of Involuntary Unemployment”, Ekonomika, 100(1), pp. 54-66. doi: 10.15388/Ekon.2021.1.3.

Abstract

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.

PDF
HTML

References

G. D. Hansen. Indivisible labor and business cycle. Journal of Monetary Economics, 16:309–327, 1985.
M. Kalecki. The classical stationary state'' A comment, Economic Journal, 54: 131–132, 1944.
M. Lavoie. Efficiency wages in Kaleckian models of employment. Journal of Post Keynesian Economics, 23:449–464, 2001.
I. M. McDonald and R. M. Solow. Wage bargaining and employment. American Economic Review, 71:896–908, 1981.
M. Otaki. The dynamically extended Keynesian cross and the welfare-improving fiscal policy. Economics Letters, 96:23–29, 2007.
M. Otaki. A welfare economics foundation for the full-employment policy. Economics Letters, 102:1–3, 2009.
M. Otaki. The aggregation problem in the employment theory: The representative individual model or individual employees model?
(https://www.scirp.org/journal/paperinformation.aspx?paperid=25920). Theoretical Economics Letters, 2:530–533, 2012.
M. Otaki. Keynesian Economics and Price Theory: Re-orientation of a Theory of Monetary Economy. Springer, 2015.
A. C. Pigou, The classical stationary state, Economic Journal, 53:343–351, 1943.
Y. Tanaka. Indivisible labor supply and involuntary unemployment: monopolistic competition model. The Singapore Economic Review, forthcoming, 2020a.
Y. Tanaka. Involuntary unemployment and fiscal policy for full-employment. Theoretical Economics Letters, 10(4):745–757, 2020b.
Y. Tanaka. Involuntary unemployment with indivisible labor supply under perfect competition. Economics Bulletin, 40:1914–1923, 2020c.
T. Umada. On the existence of involuntary unemployment (hi-jihatsuteki-shitsugyo no sonzai ni tsuite (in Japanese)). Yamaguchi Keizaigaku Zasshi, 45(6):61–73, 1997.
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Please read the Copyright Notice in Journal Policy