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"Frictional unemployment"
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Do Matching Frictions Explain Unemployment? Not in Bad Times
This paper proposes a search-and-matching model of unemployment in which jobs are rationed: the labor market does not clear in the absence of matching frictions. This job shortage arises in an economic equilibrium from the combination of some wage rigidity and diminishing marginal returns to labor. In recessions, job rationing is acute, driving the rise in unemployment, whereas matching frictions contribute little to unemployment. Intuitively in recessions, jobs are lacking, the labor market is slack, and recruiting is easy and inexpensive, so matching frictions do not matter much. In a calibrated model, cyclical fluctuations in the composition of unemployment are large.
Journal Article
Youth unemployment in Nigeria: nature, causes and solutions
This study investigates the nature and causes of youth unemployment in Nigeria, with the aim of proffering evidence-based workable solutions as policy recommendation. Its contribution to the literature on youth unemployment is the joint examination of the nature and causes of youth unemployment, which gives a holistic view and provides sufficient background for designing holistic solutions to the problem of youth unemployment in Nigeria. The study employs a Vector Autoregressive (VAR) model. This describes the spillovers of youth employment among different sectors (Agriculture, Industry and Services) in Nigeria; thus, explains whether the nature of youth unemployment in Nigeria is frictional or not. The study also adopts Panel Autoregressive Distributed (PARDL) model to analyze the short-run and long-run significance of the determinants of youth unemployment, such output level, macroeconomic uncertainties and labour market flexibility. This helps to determine the main causes of youth unemployment in Nigeria and whether the youth unemployment is cyclical or structural in nature. The results suggest that the nature of youth unemployment in Nigeria is non-cyclical, partly frictional, but largely structural. This may explain why youth unemployment is increasing in Nigeria despite government remedial efforts; as government focused on frictional youth unemployment remedial policies and dispelled the potential of youth unemployment being structural in nature. The recommended solutions are fiscal and monetary policy easing and demand-side subsidy programme to dealing with structural youth unemployment. The study also shows the need to enforce relevant extant labour laws and regulations to stem the tide of youth unemployment and underemployment in Nigeria.
Journal Article
Monopsony in Motion
What happens if an employer cuts wages by one cent? Much of labor economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition.Monopsony in Motionstands apart by analyzing labor markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labor market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labor economics based on this alternative and equally plausible assumption.
The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment, and human capital can all be improved by recognizing that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monopsonistic labor market, concludes Manning, the \"free\" market can no longer be sustained as an ideal and labor economists need to be more open-minded in their evaluation of labor market policies.Monopsony in Motionwill represent for some a new fundamental text in the advanced study of labor economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.
eBook
The European youth guarantee
This essay aims to discuss the conditions for a successful implementation of the European Youth Guarantee in Italy. In principle, the program should be able to affect the frictional and mismatch components of unemployment, if not the Keynesian and neoclassical ones, as the experience of Scandinavian countries suggests. However, this requires an in-depth transformation of the entire school-to-work transition system, involving not only public employment services, but also educational and training systems. To tackle the Keynesian and neoclassical components of unemployment, instead, it is vital to rethink European austerity and reduce the labor wedge.
Journal Article
Real Effects of Money Growth and Optimal Rate of Inflation in a Cash-in-Advance Economy with Labor-Market Frictions
This paper studies the consequences of labor-market frictions for the real effects of steady inflation when cash is required for households' consumption purchases and firms' wage payments. Money growth may generate a positive real effect by encouraging vacancy creation and raising job matches. This may result in a positive optimal rate of inflation, particularly in an economy with moderate money injections to firms and with nonnegligible labormarket frictions in which wage bargains are not efficient. This main finding holds for a wide range of money injection schemes, with alternative cash constraints, and in a second-best world with preexisting distortionary taxes.
Journal Article
Labor market frictions, agglomeration, and regional unemployment disparities
This paper constructs a footloose entrepreneur model with Diamond–Mortensen–Pissarides job search and matching frictions in the manufacturing sector. It captures unemployment adjustment both within the manufacturing sector and in the regional labor market. The within-sector unemployment rate is negatively affected by firm market access and is positively related to the intensity of firm screening among heterogeneous candidate workers. The regional unemployment rate, on the other hand, is related to the sectoral share of job searching across sectors within each region. We find the coexistence of a smaller within-sector unemployment rate and a larger local unemployment rate in the region with firm agglomeration. We also extend the analysis by examining the role of labor market frictions across sectors and the interdependence between agglomeration and unemployment.
Journal Article
Wage-Tenure Contracts in a Frictional Labour Market: Firms' Strategies for Recruitment and Retention
A common assumption in equilibrium search and matching models of the labour market is that each firm posts a wage, to be paid to any worker hired. This paper considers the implications of firms posting contracts, in a random matching model with on-the-job search. More complex contracts enable firms to address both recruitment and retention problems by, for example, increasing the wage with tenure. The effect on the labour market is to reduce turnover, below the level required for efficient matching of workers to firms.
Journal Article
International Trade with Equilibrium Unemployment
While most standard economic models of international trade assume full employment, Carl Davidson and Steven Matusz have argued over the past two decades that this reliance on full-employment modeling is misleading and ill-equipped to tackle many important trade-related questions. This book brings together the authors' pioneering work in creating models that more accurately reflect the real-world connections between international trade and labor markets.
The material collected here presents the theoretical and empirical foundations of equilibrium unemployment modeling, which the authors and their collaborators developed to give researchers and policymakers a more realistic picture of how international trade affects labor markets, and of how transnational differences in labor markets affect international trade. They address the shortcomings of standard models, describe the empirics that underlie equilibrium unemployment models, and illustrate how these new models can yield vital insights into the relationship between international trade and employment. This volume also includes an indispensable general introduction as well as concise section introductions that put the authors' work in context and reveal the thinking behind their ideas.
Economists are only now realizing just how important these ideas are, making this book essential reading for researchers and students.
eBook
The Canadian Labor Market: Developments, Prospects, and Policy
This paper examines recent developments in the Canadian labor market. Using disaggregated labor market data, various hypotheses concerning the slow employment growth and rise in unemployment since 1990 are evaluated. The analysis indicates that a large part of the recent rise in the unemployment rate may reflect an increase in the structural rather than the cyclical component of unemployment. Various sources of labor market rigidities that may have contributed to the increase in structural unemployment are examined. In particular, the role of the unemployment insurance system in contributing to labor market rigidity and measures for reforming this system, including the recent proposals of the government, are discussed. Finally, this paper examines active labor market policies that could help to alleviate structural unemployment.
Journal Article