Market power and unemployment

Abstract

This paper explores the under-consumptionist idea that market power can preclude the existence of a full employment equilibrium within the framework of the modern theory of economic growth. It is shown that the introduction of market power can indeed eliminate the full employment equilibrium. In an attempt to assess the importance of this possibility maximum values for the market power parameters consistent with a full employment equilibrium existing are computed. In some plausible cases these maxima are uncomfortably low suggesting that market power has significant potential for causing unemployment.