A three-sector general equilibrium model is employed to analyze the consequences of changes in aggregate demand, union power, workers' time horizons, and labor force size on "unionized" industries, industries with competitive labor markets,and unemployment. Workers are "voluntarily" unemployed while searching for jobs,attempting to arbitrage a wage gap created by partial "unionization." Many reduced-form elasticities are ambiguous in algebraic sign. For example, decreased aggregate demand may increase employment in industries with competitive labor markets. However, a larger and younger work force with enhanced aspirations for higher-paying jobs will have unambiguously higher unemployment.

B. Curtis Eaton, Richard G. Lipsey; The Principle of Minimum Differentiation Reconsidered: Some New Developments in the Theory of Spatial Competition12, The Rev

B. Curtis Eaton, Richard G. Lipsey; A Comment on Location and Industrial Efficiency with Free Entry, The Quarterly Journal of Economics, Volume 93, Issue 3