The macroeconomics of the labor market: three fundamental views

Arbeitspapier

We distinguish and assess three fundamental views of the labor market regarding the movements in unempoyment: (i) the frictionless equilibrium view; (ii) the chain reaction theory, or prolonged adjustment view; and (iii) the hysteresis view. While the frictionless view implies a clear compartmentalization between the short- and long-run, the hysteresis view implies that all the shortrun fluctuations automatically turn into long-run changes in the unemployment rate. We assert the problems faced by these conceptions in explaining the diversity of labor market experiences across the OECD labor markets. We argue that the prolonged adjustment view can overcome these problems since it implies that the short, medium, and long runs are interrelated, merging with one another along an intertemporal continuum.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 585

Classification and Topics

• Classification: Wirtschaft ; Labor Force and Employment, Size, and Structure ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Investment; Capital; Intangible Capital; Capacity ; Wages, Compensation, and Labor Costs: General
• Subject: Interactive labor market dynamics ; Interplay of lags and shocks ; Frictional growth ; Growth drivers ; Unemployment ; Theorie der Arbeitslosigkeit ; Arbeitsmarkt ; Theorie ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karanassou, Marika ; Sala, Héctor ; Snower, Dennis J.
• Event: Veröffentlichung
• (who): Queen Mary University of London, Department of Economics
• (where): London
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/3954
• Last update: 10.03.2025, 11:46 AM CET