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The Benchmark Macroeconomic Models of the Labour Market

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  • Lisi, Gaetano

Abstract

This technical note aims to provide a practical overview of the labour market’s benchmark macroeconomic models. The matching models are the primary and most popular theoretical tools used by economists to evaluate various labour market policies and to study the problem of unemployment. These models explain the co-existence in equilibrium of unemployment and vacancies through frictions in matching workers and firms and 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, 2013. "The Benchmark Macroeconomic Models of the Labour Market," MPRA Paper 62318, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:62318
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    More about this item

    Keywords

    Matching and Job Search Theory; “non-walrasian” Labour Market; Search and Matching frictions; Job Creation and Job Destruction; Equilibrium Unemployment;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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