tailieunhanh - Lecture Business economics - Lecture 17: Unemployment
In this chapter you will learn about the data used to measure the amount of unemployment, consider how unemployment arises from the process of job search, consider how unemployment can result from minimum-wage laws, see how unemployment can arise from bargaining between firms and unions, examine how unemployment results when firms choose to pay efficiency wages. | Review of the previous lecture Economic prosperity, as measured by real GDP per person, varies substantially around the world. The average income of the world’s richest countries is more than ten times that in the world’s poorest countries. The standard of living in an economy depends on the economy’s ability to produce goods and services. Productivity depends on the amounts of physical capital, human capital, natural resources, and technological knowledge available to workers. Review of the previous lecture Government policies can influence the economy’s growth rate in many different ways. The accumulation of capital is subject to diminishing returns. Because of diminishing returns, higher saving leads to a higher growth for a period of time, but growth will eventually slow down. Also because of diminishing returns, the return to capital is especially high in poor countries. Lecture 17 Unemployment Instructor: Abbas Course code: ECO 400 Lecture Outline Natural rate of | Review of the previous lecture Economic prosperity, as measured by real GDP per person, varies substantially around the world. The average income of the world’s richest countries is more than ten times that in the world’s poorest countries. The standard of living in an economy depends on the economy’s ability to produce goods and services. Productivity depends on the amounts of physical capital, human capital, natural resources, and technological knowledge available to workers. Review of the previous lecture Government policies can influence the economy’s growth rate in many different ways. The accumulation of capital is subject to diminishing returns. Because of diminishing returns, higher saving leads to a higher growth for a period of time, but growth will eventually slow down. Also because of diminishing returns, the return to capital is especially high in poor countries. Lecture 17 Unemployment Instructor: Abbas Course code: ECO 400 Lecture Outline Natural rate of unemployment Why is there unemployment? Job search Wage rigidity Natural rate of unemployment Natural rate of unemployment the average rate of unemployment around which the economy fluctuates. In a recession, the actual unemployment rate rises above the natural rate. In a boom, the actual unemployment rate falls below the natural rate. A first model of the natural rate Notation: L = # of workers in labor force E = # of employed workers U = # of unemployed U/L = unemployment rate Assumptions 1. L is exogenously fixed. 2. During any given month, s = fraction of employed workers that become separated from their jobs, f = fraction of unemployed workers that find jobs. Natural rate of unemployment s = rate of job separations f = rate of job finding (both exogenous) The transitions between employment and unemployment The steady state condition: the labor market is in steady state, or long-run equilibrium, if the unemployment rate is constant. The steady-state condition is: Solving for the .
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