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The Private and Social Costs of Unemployment

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  • Martin Feldstein

Abstract

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.

Suggested Citation

  • Martin Feldstein, 1977. "The Private and Social Costs of Unemployment," NBER Working Papers 0223, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0223
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    Cited by:

    1. Douglas A. Hibbs, Jr., 1982. "Public Concern about Inflation and Unemployment in the United States: Trends, Correlates, and Political Implications," NBER Chapters,in: Inflation: Causes and Effects, pages 211-232 National Bureau of Economic Research, Inc.
    2. Grady, Patrick, 1986. "Background Paper on Full Employment," MPRA Paper 26328, University Library of Munich, Germany.
    3. Bastianen, R.D. & Butter, F.A.G. den & Ours, J.C., 1991. "Welfare losses of non-participation in employment," Serie Research Memoranda 0070, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    4. James Tobin, 1983. "Macroeconomics Under Debate," Cowles Foundation Discussion Papers 669, Cowles Foundation for Research in Economics, Yale University.
    5. Jon D. Wisman & Aaron Pacitti, 2017. "Guaranteed Employment and Universal Child Care For a New Social Contract," Working Papers 2017-05, American University, Department of Economics.
    6. Haroon Bhorat & David Tseng, 2012. "The Newly Unemployed and the UIF Take-up Rate in the South African Labour Market," Working Papers 12147, University of Cape Town, Development Policy Research Unit.
    7. Nabi, Mahmoud Sami & Boughzala, Mongi, 2009. "Essai de chiffrage du coût social du chômage des jeunes diplômés en Tunisie
      [Social cost of young unemployed graduates in Tunisia]
      ," MPRA Paper 84438, University Library of Munich, Germany.
    8. repec:ind:nipfwp:19 is not listed on IDEAS
    9. repec:npf:wpaper:19 is not listed on IDEAS
    10. Paul R. Flacco & Leroy O. Laney & Marie C. Thursby & Thomas D. Willett, 1984. "Exchange Rates And Trade Policy," Contemporary Economic Policy, Western Economic Association International, vol. 2(4), pages 6-18, January.
    11. Sridhar, Kala Seetharam, 2000. "Tax Incentive Programs and Unemployment Rate," The Review of Regional Studies, Southern Regional Science Association, vol. 30(3), pages 275-298, Winter.
    12. 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., vol. 40(119), pages 149-171.

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