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Declining Search Frictions, Unemployment and Self-Employment

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  • Piotr Denderski
  • Florian Sniekers

Abstract

In most OECD countries, unemployment rates show no trend, which is puzzling if advancements in information and communication technologies decrease labour-market frictions. We show, both analytically and quantitatively, that accounting for the secular decline in self-employment rates solves the puzzle. While declining labour-market frictions can theoretically explain these trends, we provide contradictory causal evidence that the roll-out of broadband internet has increased self-employment and decreased unemployment rates. We reconcile these observations with a new model featuring frictions in both labour and goods markets. We explain falling self-employment and non-trending unemployment quantitatively by labour-market frictions declining relatively more than goods-market frictions.

Suggested Citation

  • Piotr Denderski & Florian Sniekers, 2024. "Declining Search Frictions, Unemployment and Self-Employment," The Economic Journal, Royal Economic Society, vol. 134(659), pages 1100-1145.
    • Handle: RePEc:oup:econjl:v:134:y:2024:i:659:p:1100-1145.
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