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Corresponding Author:
Paul Oslington, Alphacrucis College, Sydney, Australia

Free Factor Unemployment

Volume 74 - Issue 2, May 2021
(pp. 225-244)
JEL classification: D50, F11, J64, J80
Keywords: Unemployment, General Equilibrium, Development, Zero Wages

Abstract

It is well known that introducing various distortions into neoclassical general equilibrium models generates unemployment.  This paper shows how unemployment can occur in the absence of such distortions, with particular patterns of technology, prices and factor endowments.  For a technology with a labour saturation point, the marginal product of labour can fall to zero under particular market conditions, so that labour is in excess supply regardless of the wage rate.  This type of unemployment  can occur in the agricultural sector of developing economies, depression economies, and the rising urban underclass.

 

 


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