Equilibrium Unemployment Theory
This book focuses on the modeling of the transitions in and out of unemployment, given the stochastic processes that break up jobs and lead to the formation of new jobs, and on the implications of this approach for macroeconomic equilibrium and for the efficiency of the labor market.An equilibrium theory of unemployment assumes that firms and workers maximize their payoffs under rational expectations and that wages are determined to exploit the private gains from trade. This book focuses on the modeling of the transitions in and out of unemployment, given the stochastic processes that break up jobs and lead to the formation of new jobs, and on the implications of this approach for macroeconomic equilibrium and for the efficiency of the labor market. This approach to labor market equilibrium and unemployment has been successful in explaining the determinants of the "natural" rate of unemployment and new data on job and worker flows, in modeling the labor market in equilibrium business cycle and growth models, and in analyzing welfare policy. The second edition contains two new chapters, one on endogenous job destruction and one on search on the job and job-to-job quitting. The rest of the book has been extensively rewritten and, in several cases, simplified.
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ambiguous effects analysis assume assumption Beveridge curve changes Cobb-Douglas cost of search creation and job derived effect efficiency units empirical employment subsidies endogenous equi equilibrium unemployment exogenous expected return figure firing taxes firm's firms and workers given unemployment growth higher hiring subsidy idiosyncratic shocks implies increases influence interest rate job advertising job creation condition job creation line job creation rate job destruction condition job destruction rate job productivity job seekers job vacancies labor force labor-market tightness leisure lower marginal cost marginal tax rate market tightness matching function matching technology maximize model of chapter Mortensen Nash number of jobs on-the-job search optimal option value parameter Pissarides ployment rate of job reservation productivity reservation wage returns to scale satisfies search externalities search intensity shifts the Beveridge shifts the job steady stochastic job matchings threat point tion unem unemployed workers unemployment income vacant jobs variable wage bargain wage equation wage rate