BLch6Complete - The labor market IS-LM model of last section was based on 3 simplifying assumptions No expectation Closed economy i.e no international

BLch6Complete - The labor market IS-LM model of last...

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Blch6 1 The labor market IS-LM model of last section was based on 3 simplifying assumptions: - No expectation - Closed economy i.e. no international sector - Short run implying fixed prices Only 2 kinds of markets were considered - The financial markets - The goods market We now introduce - A third market: the labor market - The medium run implying flexible prices
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Blch6 3 Additional labor statistics Broken down by – Age group – Skills - education levels – Race and sex Is there a dual labor market based on level of education?
Blch6 4 Stock versus flow statistics The flows offer a better illustration of the actual situation in the labor market The same unemployment rate could correspond to – Many people going in and out of N each month – The same people remaining unemployed for years i.e. a very flexible versus a sclerosed labor market The flow data are collected in the Current Population Survey (average monthly data 94-99)
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Blch6 6 N 127 U 7 NL 66.7 1.3 - discouraged 1.1 - try again
Blch6 7 Further statistics based on flows Monthly flows in and out of U IN from N from NL Total Pool in U 1.5 1.1 2.6 7 OUT to N to NL Total 1.8 1.3 3.1 Probability of unemployed leaving U each month: 3.1 / 7 = .44 Probability of unemployed finding a job each month: 1.8 / 7 = .26 Average duration of unemployment: 1/.44 = 2 months 1/4

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