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Matching Models of Equilibrium Unemployment: An Overview

  • Lisi, Gaetano

This book aims to provide an overview of the labour market's benchmark macroeconomic models. The matching models of equilibrium unemployment are, in fact, the primary and most popular theoretical tools used by economists to evaluate various labour market policies and to study one of the key macroeconomic variables: the unemployment rate. It has been recognised that unemployment has also a structural nature which persists over the business cycle. The matching models, i.e. the models à la Mortensen-Pissarides, explain the co-existence in equilibrium of unemployment and vacancies through frictions in matching workers and firms. Furthermore, these models generate predictions that have the right direction: unemployment goes up in recession and down in boom, while job vacancies shift in the opposite direction. The central role of these models in imperfect labour markets has recently been confirmed by the 2010 Nobel Prize for economy awarded to the founders of this approach: Peter Diamond, Dale Mortensen and Christopher Pissarides.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30191.

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Date of creation: 28 Feb 2011
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Publication status: Published in LAP LAMBERT Academic Publishing book.ISBN-1(2011): pp. 1-64
Handle: RePEc:pra:mprapa:30191
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  1. Nber, 1966. "The Measurement and Interpretation of Job Vacancies," NBER Books, National Bureau of Economic Research, Inc, number unkn66-2, October.
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  20. Margaret Stevens, 2007. "New Microfoundations For The Aggregate Matching Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 847-868, 08.
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  26. Jacques, Jean-François & Fugazza, Marco, 2004. "Labor market institutions, taxation and the underground economy," Economics Papers from University Paris Dauphine 123456789/1888, Paris Dauphine University.
  27. Pissarides, Christopher A, 1985. "Taxes, Subsidies, and Equilibrium Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 121-33, January.
  28. Petrongolo, Barbara & Pissarides, Christopher, 2000. "Looking Into The Black Box: A Survey Of The Matching Function," CEPR Discussion Papers 2409, C.E.P.R. Discussion Papers.
  29. Maxim Bouev, 2002. "Official Regulations and the Shadow Economy: A Labour Market Approach," William Davidson Institute Working Papers Series 524, William Davidson Institute at the University of Michigan.
  30. Gregg, Paul & Petrongolo, Barbara, 2005. "Stock-flow matching and the performance of the labor market," European Economic Review, Elsevier, vol. 49(8), pages 1987-2011, November.
  31. Jackman, R & Layard, Richard & Pissarides, C, 1989. "On Vacancies," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 377-94, November.
  32. Coles, Melvyn G & Muthoo, Abhinay, 1998. "Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 65(2), pages 235-60, April.
  33. Melvyn Coles & Barbara Petrongolo, 2008. "A Test Between Stock-Flow Matching And The Random Matching Function Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1113-1141, November.
  34. Richard Bellman, 1957. "On a Dynamic Programming Approach to the Caterer Problem--I," Management Science, INFORMS, vol. 3(3), pages 270-278, April.
  35. Mariano Bosch & Julen Esteban-Pretel, 2009. "Cyclical Informality and Unemployment," CIRJE F-Series CIRJE-F-613, CIRJE, Faculty of Economics, University of Tokyo.
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