From One To Many Islands: The Emergence Of Search And Matching Models
AbstractThe notion of frictional unemployment first arose in the writings of Beveridge, Pigou and Hicks. Why did it fail at the time to grow into a fully fledged theory ? Our answer is simple. This failure was due to the fact these economists were unwilling and/or unable to go beyond the then-prevailing Marshallian approach, in particular to depart from its trade organization assumptions. They did not realize that these assumptions excluded any rationing outcome in general, and any unemployment result in particular. We make our claim in three steps. First, we make explicit the trade-organization assumptions underpinning Marshallâs equilibrium theory. Our second step is a study of the attempts at introducing unemployment in a Marshallian framework. We start with an examination of Beveridgeâs, Pigouâs and Hicksâs early works on wages and unemployment. We also briefly discuss how and why Keynes was able to shift attention from frictional to involuntary unemployment. Newt, for a reason that will become clear as the paper evolves, we ponder Friedmanâs celebrated Presidential Address inaugurating the notion of a natural rate of unemployment. In our third and last step we look at the papers by McCall, Lucas and Prescott, Mortensen and Pissarides that paved the way for the present thriving research literature. We show that their success in providing an equilibrium unemployment result stems from the fact that they have indeed departed from the Marshallian trade-organization assumptions
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Bulletin of Economic Research.
Volume (Year): 64 (2012)
Issue (Month): 3 (07)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378
Other versions of this item:
- Anna BATYRA & Michel DE VROEY, 2009. "From one to many islands : the emergence of search and matching models," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009005, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
- B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
- B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
- Michel DE VROEY & Pierre MALGRANGE, 2011. "The History of Macroeconomics from Keynes’s General Theory to the Present," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Pierre Malgrange & Michel De Vroey, 2012. "Klein et l’émergence de la modélisation macroéconomique," Économie et Statistique, Programme National Persée, vol. 451(1), pages 21-30.
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