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Matching Models of Equilibrium Unemployment: An Overview

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  • Lisi, Gaetano

Abstract

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.

Suggested Citation

  • Lisi, Gaetano, 2011. "Matching Models of Equilibrium Unemployment: An Overview," MPRA Paper 30191, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:30191
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    File URL: https://mpra.ub.uni-muenchen.de/30191/1/MPRA_paper_30191.pdf
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    References listed on IDEAS

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    Cited by:

    1. Gaetano LISI, 2011. "Optimal taxation and monitoring in an economy with matching frictions and underground activities," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 2, pages 5-11, June.

    More about this item

    Keywords

    Matching and Job Search Theory; Vacancies; Labour Markets with frictions;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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