Natural Rate of Unemployment a Use only s& f to express U/L SE .f7=s(D-) (1 e.g. 1% of the employed lose their job each month, 10% of the unemployed find a job each month Then
Natural Rate of Unemployment ◼ Use only s & f to express U/L e.g. 1% of the employed lose their job each month, 10% of the unemployed find a job each month. Then… fU sE = fU s L U = − ( ) (1 ) U U f s L L = − U s L f s = +
Natural Rate of Unemployment s=1%0---every month, 1% lose job >For 1 person after working for months, tend to lose job F=10%0---every month, 10%/ get job >For 1 person after being unemployed for months tend to get a job
Natural Rate of Unemployment s=1% --- every month, 1% lose job →For 1 person, after working for _____ months, tend to lose job F=10% --- every month, 10% get job →For 1 person, after being unemployed for _____ months, tend to get a job
Frictional Unemployment (1st reason) a It takes time to match workers and jobs e.g. technology improvement new production processes or new varieties of goods different locations and sectors
Frictional Unemployment (1st reason) ◼ It takes time to match workers and jobs e.g. technology improvement → new production processes or new varieties of goods different locations and sectors
Frictional Unemployment (1st reason) a Public policy implication 1. Unemployment insurance >less pressure to search for new job More likely to turn down unattractive offers However Reduce uncertainty about income so that economically and mentally → Better matching
Frictional Unemployment (1st reason) ◼ Public policy implication 1. Unemployment insurance → less pressure to search for new job → More likely to turn down unattractive offers However → Reduce uncertainty about income so that economically and mentally… → Better matching