Job reallocation, employment fluctuations and unemployment
In: Handbook of Macroeconomics
The purpose of this chapter is twofold. First, it reviews the model of search and matching equilibrium and derives the properties of employment and unemployment equilibrium. Second, it applies the model to the study of employment fluctuations and to the explanation of differences in unemployment rates in industrialized countries.The search and matching model is built on the assumptions of a time-consuming matching technology that determines the rate of job creation given the unmatched number of workers and jobs; and on a stochastic arrival of idiosyncratic shocks that determines the rate of job destruction given the wage contract between matched firms and workers. The outcome is a model for the flow of new jobs and unemployed workers from inactivity to production (the 'job creation' flow) and one for the flow of workers from employment to unemployment and of jobs out of the market (the 'job destruction' flow). Steady-state equilibrium is at the point where the two flows are equal.The model is shown to explain well the employment fluctuations observed in the US economy, within the context of a real business cycle model. It is also shown that the large differences in unemployment rates observed in industrialized countries can be attributed to a large extent to differences in policy towards employment protection legislation (which increases the duration of unemployment and reduces the flow into unemployment) and the generosity of the welfare state (which reduces job creation). It is argued that on the whole European countries have been more generous in their unemployment support policies and in their employment protection legislation than the USA. The chapter also surveys other reasons given in the literature for the observed levels in unemployment, including mismatch and real interest rates.
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.
|This chapter was published in: ||This item is provided by Elsevier in its series Handbook of Macroeconomics with number
1-18.||Handle:|| RePEc:eee:macchp:1-18||Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description|
When requesting a correction, please mention this item's handle: RePEc:eee:macchp:1-18. 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: (Dana Niculescu)
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.