The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Involuntary Unemployment

  • John B. Taylor
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_702

Abstract

The most common and analytically useful definition of involuntary unemployment is based on the labour supply curve: if workers are off the labour supply curve – so that there is an excess supply of labour at the current real wage – then, by definition, there is involuntary unemployment. The amount of involuntary unemployment is equal to the amount of excess labour supply. If workers are on the labour supply curve, then, by definition, there is no involuntary unemployment. One could analogously define involuntary overemployment as a situation of insufficient supply of labour at the prevailing real wage (as may occur during wartime with wage and price controls), but the term is seldom used.

Keywords

Aggregate demand Efficiency wages Frictional unemployment Incentive wages Involuntary unemployment Labour supply Marginal rate of substitution Matching Minimum wages Natural rate of unemployment Nominal wages Non-accelerating inflation rate of unemployment (NAIRU) Optimal contracts Real business cycles Real wages Search theory Staggered wage setting Sticky wages Unemployment Unemployment measurement Wage differentials Wage rigidity 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • John B. Taylor
    • 1
  1. 1.