Seminar Papers, Institute for International Economic Studies, Stockholm University
Unemployment - Structural
Abstract: Structural unemployment differs from cyclical unemployment
by not disappearing in cyclical booms. In economic theory, structural
unemployment is usually analysed in terms of the concept of equilibrium
unemployment (the "natural unemployment rate" in Friedman’s terminology).
Two elaborate concepts of equilibrium unemployment – the non-accelerating
inflation rate of unemployment (the NAIRU) and the unemployment rate that
induces firms and workers to accept the same real wage (the PS-WS-model)
are used as analytical framework for the paper. These models are also
related to search models for the labour market, in which unemployment
equilibrium is defined as a situation where the number of individuals
finding jobs equals the number of individuals who are separated from jobs.
But it is argued in the paper that it is reasonable to widen the concept of
structural unemployment to also include unemployment persistence, that is,
a tendency for unemployment to continue to be high for quite a while also
after temporary unemployment-creating shocks. The paper pinpoints various
factors that influence the level of structural unemployment, which differs
in time and place. It ends with a discussion of how structural unemployment
is influenced by policy actions.
Keywords: equilibrium unemployment; structural unemployment; stock and flow equilibrium in the labour market; unemployment persistence; (follow links to similar papers)
JEL-Codes: E24; J60; (follow links to similar papers)
22 pages, September 23, 1999
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