Fluctuations in Equilibrium Unemployment
Fluctuations in the equilibrium rate of unemployment can only be understood within a theory of the natural or equilibrium rate. It is not enough to say that unemployment is the difference between supply and demand in the labor market, though of course it always will be. In equilibrium, no participants in the market can have an unexploited opportunity to make themselves better off. At the equilibrium unemployment rate, employers cannot obtain labor at lower cost by offering work at below the market wage to the unemployed. Unemployed workers cannot raise their effective real incomes by taking lower wages in exchange for immediate employment. The task of the theory is to explain why any unemployment remains at all when these conditions are satisfied. Part of this problem has been studied in detail in the "search theory" of unemployment -- once a worker becomes unemployed, it is reasonably well understood why the worker does not become employed again immediately. The theory of why people become unemployed in the first place is less well developed and is the main concern of this paper. Most of the unemployed are looking for new work because their previous jobs ran out. Consequently, the main ingredient of a theory of the flow of workers into unemployment is a theory of the duration of employment. Such a theory is developed here, along reasonably standard lines.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 78 (1988)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: https://www.aeaweb.org/aer/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
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.:
- Stephen T. Marston, 1976. "Employment Instability and High Unemployment Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(1), pages 169-210.
- Barro, Robert J, 1977.
"Unanticipated Money Growth and Unemployment in the United States,"
American Economic Review,
American Economic Association, vol. 67(2), pages 101-15, March.
- Robert J. Barro, 1976. "Unanticipated Money Growth and Unemployment in the United States," Working Papers 234, Queen's University, Department of Economics.
- Sargent, Thomas J, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 207-37, April.
- Thomas J. Sargent, 1973. "Rational Expectations, the Real Rate of Interest, and the Natural Rate of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(2), pages 429-480.
- Robert E. Hall, 1972. "Turnover in the Labor Force," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(3), pages 709-764.
When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:78:y:1988:i:2:p:269-75. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.