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The Private and Social Costs of Unemployment


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  • Martin Feldstein


This short note emphasizes and illustrates two basic points: (1) The private costs of unemployment, i.e., the costs borne by the unemployed themselves, vary substantially and are often extremely low. This low private cost is an important cause of the permanently high unemployment rate in the United States. (2) The social costs of unemployment, i.e., the costs of unemployment to the nation as a whole regardless of how they are distributed, must be judged by considering the specific policy by which a worker would be reemployed. It is wrong to regard unemployment as either without cost (because the unemployed enjoy the opportunity for job search and leisure) or as having a cost equal to lost output. Examples are given to show that output may overstate or understate true social cost, depending on the options available for reemployment.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0223.

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Date of creation: Dec 1977
Date of revision:
Publication status: published as Feldstein, Martin S. "The Private and Social Costs of Unemployment." The American Economic Review, Vol. 68, No. 2, (May 1978), pp. 155-158.
Handle: RePEc:nbr:nberwo:0223

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Cited by:
  1. Grady, Patrick, 1986. "Background Paper on Full Employment," MPRA Paper 26328, University Library of Munich, Germany.
  2. Fernando Coloma & Bernardita Vial, 2003. "Desempleo e Inactividad Juvenil en Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(119), pages 149-171.
  3. Haroon Bhorat & David Tseng, 2012. "The Newly Unemployed and the UIF Take-up Rate in the South African Labour Market," Working Papers, University of Cape Town, Development Policy Research Unit 12147, University of Cape Town, Development Policy Research Unit.
  4. repec:ind:nipfwp:19 is not listed on IDEAS
  5. James Tobin, 1983. "Macroeconomics Under Debate," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 669, Cowles Foundation for Research in Economics, Yale University.


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