This book focuses on the modeling of the transitions in and out of unemployment, given the stochastic processes that break up jobs and lead to the formation of new jobs, and on the implications of this. This approach to labor market equilibrium and unemployment has been successful in explaining the determinants of the "natural" rate of unemployment and new data on job and worker flows, in modeling the labor market in equilibrium business cycle and growth models, and in analyzing welfare policy. An equilibrium theory of unemployment assumes that firms and workers maximize their payoffs under rational expectations and that wages are determined to exploit the private gains from trade. This book focuses on the modeling of the transitions in and out of unemployment, given the stochastic processes that break up jobs and lead to the formation of new jobs, and on the implications of this approach for macroeconomic equilibrium and for the efficiency of the labor market. A large literature has assessed both the predictions of the model and the assumptions made on worker maximands.
Of course, the ‘cost’ of this model is the assumption that workers are ‘rational cheaters’only punishment and wages motivate them. The rest of the book has been extensively rewritten and, in several cases, simplified Read more.Īnnotation An equilibrium theory of unemployment assumes that firms and workers maximize their payoffs under rational expectations and that wages are determined to exploit the private gains from trade. larly the equilibrium unemployment search models of Mortensen and Pissarides. The second edition contains two new chapters, one on endogenous job destruction and one on search on the job and job-to-job quitting. Equilibrium Unemployment Theory Pissarides, Christopher A. This approach to labor market equilibrium and unemployment has been successful in explaining the determinants of the "natural" rate of unemployment and new data on job and worker flows, in modeling the labor market in equilibrium business cycle and growth models, and in analyzing welfare policy. Annotation An equilibrium theory of unemployment assumes that firms and workers maximize their payoffs under rational expectations and that wages are determined to exploit the private gains from trade.