Unemployment - Structural
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.
|Date of creation:||23 Sep 1999|
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- Katz, Lawrence F & Meyer, Bruce D, 1990.
"Unemployment Insurance, Recall Expectations, and Unemployment Outcomes,"
The Quarterly Journal of Economics,
MIT Press, vol. 105(4), pages 973-1002, November.
- Lawrence F. Katz & Bruce D. Meyer, 1988. "Unemployment Insurance, Recall Expectations, And Unemployment Outcomes," NBER Working Papers 2594, National Bureau of Economic Research, Inc.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
- Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-84, December.
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