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Regular version of the site

Book chapter

Model of General Equilibrium in Multisector Economy with Monopolistic Competition and Hypergeometric Utilities

P. 108-116.

We consider a general equilibrium model in a multisector economy with 𝑛 high-tech sectors where singleproduct firms compete monopolistically producing a differentiated good. Homogeneous sector is characterized by perfect competition. Workers attempt to find a job in high-tech sectors because of higher wages. However, it is possible for them to remain unemployed. Wages of employees in high-tech sectors are set by firms as a result of negotiations. Unemployment persists in equilibrium by labor market imperfections. All the consumers have identical preferences defined by a separable utility function of general form. We find the conditions such that the general equilibrium in the model exists and is unique. The conditions are formulated in terms of the elasticity of substitution between varieties of the differentiated good. We show that basic properties of the model can be described using families of hypergeometric functions.