DP50 Inequality, Malnutrition and Unemployment
This essay presents a rigorous theory of involuntary unemployment in less developed countries based on the observation that at low consumption levels a person's overall ability to work is impaired. The theory links the incidence of involuntary unemployment in a market economy to the incidence of malnutrition and this in turn to inequality in the distribution of physical assets. The theory is a classical one and attention is deliberately concentrated on situations where there is no aggregate demand deficiency. It is shown that certain patterns of inequality-reducing asset redistribution reduce the incidence of mal-nourishment and the volume of employment and thus increase the aggregate level of output in a market economy. In particular, this means that in such economies there is no necessary conflict between the goal of equality (in the distribution of assets and consumption) and the goal of increasing the aggregate level of output and employment.