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From One To Many Islands: The Emergence Of Search And Matching Models


  • Anna Batyra
  • Michel De Vroey


The 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 Marshall’s equilibrium theory. Our second step is a study of the attempts at introducing unemployment in a Marshallian framework. We start with an examination of Beveridge’s, Pigou’s and Hicks’s 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 Friedman’s 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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Suggested Citation

  • Anna Batyra & Michel De Vroey, 2012. "From One To Many Islands: The Emergence Of Search And Matching Models," Bulletin of Economic Research, Wiley Blackwell, vol. 64(3), pages 393-414, July.
  • Handle: RePEc:bla:buecrs:v:64:y:2012:i:3:p:393-414
    DOI: j.1467-8586.2010.00389.x

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    References listed on IDEAS

    1. 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 257-273, May.
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    Cited by:

    1. Danthine, Samuel & De Vroey, Michel, 2017. "The Integration Of Search In Macroeconomics: Two Alternative Paths," Journal of the History of Economic Thought, Cambridge University Press, vol. 39(04), pages 523-548, December.
    2. Michel De Vroey, 2014. "Backhouse and Boianovsky on "disequilibrium theory". A review article of transforming modern macroeconomics. Exploring disequilibrium microfoundations, 1956-2003," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 21(4), pages 724-742, August.
    3. Michel De Vroey & Pierre Malgrange, 2012. "Klein et l’émergence de la modélisation macroéconomique," Économie et Statistique, Programme National Persée, vol. 451(1), pages 21-30.
    4. 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).
    5. Samuel DANTHINE & Michel DE VROEY, 2014. "Integrating search in macroeconomics: the defining years," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    JEL classification:

    • 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


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