Institute for Research on Poverty

We provide characterization and stability results for the stationary equilibria of a competitive infinite-horizon model that incorporates the nutritional requirements of physical labor. We find that for many aggregate land stocks, there is a large continuum of stationary equilibrium unemployment rates. Since unemployment can be seen to stem from inequality in the initial distribution of land ownership, we suggest that certain land reforms can reduce unemployment. In nontechnical terms, we assume that physical labor requires adequate nutrition, and that nutrition must be maintained over time by sufficient food consumption. We combine these key nutritional assumptions with standard economic assumptions: prices clear competitive markets; firms maximize profit while producing food from labor power and rented land; and persons maximize utility while consuming food, selling labor power and renting land to firms, and buying and selling land with one another. Typically we find that full employment is but one of many possibilities, and that higher rates of unemployment arise from greater inequality in the initial distribution of land. This unemployment arises in spite of competitive markets because the competitive wage alone is too low to provide adequate nutrition and thus persons without sufficient nonwage income from the rental of land cannot afford to work. Our work extends the literature by (1) modeling the dynamic nature of nutrition, (2) allowing persons to buy and sell land, and (3) providing initial observations about the ability of land reform to alleviate unemployment.