SummaryCh18 - S u m m ar y The primary objective of this...

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Summary • The primary objective of this chapter is to provide an overview of the variety of theoretical explana- tions of unemployment, and to evaluate the extent to which UI plays a role in the Canadian unemploy- ment experience.The most important lesson to take away is that unemployment is complex, and no sim- ple explanation is sufficient.A corollary of this is that there is no single policy prescription that econo- mists can provide that will yield “full employment.” • There are many theories of unemployment, but all have a common theoretical thread. In the conven- tional neoclassical (supply and demand) model, unemployment exists only when some factors pre- vent the wage from clearing the market.The vari- ous theories we review all attempt to provide foun- dations for unemployment by introducing realistic departures relative to the simple neoclassical model. Frictional or structural unemployment . Search the- ory provides a theory of frictional unemployment, and a model of individual behaviour in the presence
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