Christoforos Antoniou Pissarides

Search Unemployment with on-the-job Search

This paper introduces on-the-job search into the model of search equilibrium that builds on the concept of the matching function and non-cooperative wage behavior. On-the-job search takes place only at short job tenures because of the accumulation of job-specific human capital. The model of search equilibrium retains familiar structure but yields new results. The most interesting is an increase in cyclical volatility of job vacancies and a dampening in that of unemployment, because of induced changes in the composition of jobs and the number of employed job seekers.

Unemployment and Vacancies in Britain

Unemployment Christopher Pissarides This paper uses data on unemployment flows and job vacancies to shed light on the phenomenal rise of unemployment in Britain, from under 3% in the 1960s to over 15% (male) unemployment in the 1980s. It finds that most of the rise is due to a fall in the demand for labour. A more expansionary fiscal policy and improved international competitiveness would have ameliorated this fall. Some of the fall, however, can also be attributed to supply pressure, which stopped wages from falling fast enough. Social security and a more relaxed attitude by the state in the provision of unemployment and supplementary benefits also contributed to the rise in unemployment, by making workers more choosey. The paper investigates whether it is possible for any given set of underlying factors to give rise to more than one equilibrium unemployment rate. If so, a temporary stimulus might release the economy from a low-level equilibrium. However the conditions necessary for this do not appear to hold in practice. Thus fiscal and monetary policy can permanently affect unemployment only if they can permanently alter aggregate demand. Microeconomic policy, like marginal employment subsidies, can, however, have a permanent effect on unemployment and the paper investigates whether there are any grounds for wishing to use such policy tools to alter the free-market equilibrium unemployment rate. There is evidence that the allocation of workers to jobs is done more efficiently at a fairly high level of overall labour demand. It follows that, unless job vacancies exceed unemployment, job creating policy measures will be beneficial.

An expenditure-based estimate of Britain's black economy

Abstract We estimate the size of Britains black economy (defined narrowly as unreported taxable income) by using income and expenditure data drawn from the 1982 Family Expenditure Survey. Our working assumptions are that all income groups report expenditure on food correctly; employees in employment report income correctly; and that the self-employed under- report their income. We estimate food exependiture equations for all groups and then invert them to arrive at the conclusion that on average true self-employment income is 1.55 times as much as reported self-employment income. This implies that the size of the black economy is about 5.5 percent of GDP.

Unemployment and the Inter-regional Mobility of Labour

This paper investigates the effect of unemployment on interregional mobility in Great Britain by estimating household migration probabilities with data from the 1977 and 1984 Labour Force Surveys. It finds that households with unemployed heads are much more likely to move than households with employed heads, but regional unemployment differentials do not play an independent explanatory role in migration decisions. It also finds that, at higher overall unemployment rates, the migration probabilities of the unemployed are reduced everywhere, but those of the employed show little change. Copyright 1989 by Royal Economic Society.

The Impact of TFP Growth on Steady-State Unemployment

Theoretical predictions of the impact of TFP growth on unemployment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We evaluate a model with embodied and disembodied technology, capitalization, and creative destruction effects by estimating the impact of TFP growth on unemployment in a panel of industrial countries. We find a large negative impact which implies that embodied technology and creative destruction play no role in the steady-state dynamics of unemployment. Capitalization effects explain some of the estimated impact but a part remains unexplained.

Taxes, Subsidies and Equilibrium Unemployment

This paper considers the effects of wage taxes, employment subsidies and unemployment benefits in a simple model of equilibrium search. Unemployment is determined by the equality of job matchings and job separations, job vacancies are determined by a zero-profit condition and wages by a Nash bargain between the meeting firm and worker. I show that marginal wage taxes influence the firms and workers equilibrium sharing rule, whereas employment subsidies and unemployment benefits influence only the surplus shared. Hence, tax-financed subsidies reduce wages and raise employment and vacancies, whereas tax-financed unemployment benefits raise wages and reduce employment and vacancies.

Real Wages and Unemployment in Australia

This paper estimates a three-equation model of the Australian labor market, for employment, real wages, and the participation rate. It uses the model to study the role of incomes policies in containing real wage growth and the reasons behind the changes in unemployment since 1970. It finds that incomes policies have not been important in controlling real wages; the rise in unemployment in the 1970s was due to the rise in tax rates and unemployment benefits; and the changes in unemployment in the 1980s were connected with changes in investment and aggregate demand. Copyright 1991 by The London School of Economics and Political Science.

Unemployment in the Great Recession

This paper studies the responses of unemployment in Germany, the United States and Britain to the Great Recession of 2008-09 by making use of Beveridge curve analysis, and in the entire OECD with other techniques. It is shown that Britain suffered from recession but no structural problems; the United States suffered from structural unemployment during the recovery; Germany exhibited a much better performance both during and after the recession. The rise in OECD unemployment is broken down into parts due to aggregate activity, the construction sector and a residual attributed to policies and institutions, which is used to reach conclusions about policy.

Job Search and Participation

The main purpose of this paper is to consider the question of labour force participation within a generalized model of job search. The only important restrictions placed oni the search model are that search takes place sequentially and that the individual be able to search only a finite number of times in his lifetime. Other less important restrictions are placed to simplify the exposition. The most important of these is, perhaps, that the individual holds his beliefs about the sequence of the distributions of job offers with complete certainty. This implies that search is used as a job-finding activity and not as an information-gathering one. Although some workers may use search for informationgathering purposes, we would expect the job-finding process to satisfy the same qualitative properties whether the information-gathering function is taken into account or not (Rothschild, 1974; Kohn and Shavell, 1974). The optimal policy is obtained in the next section for a general utility function and any sequence of distributions of job offers. Section II derives the dynamic properties of the model and utilizes the general framework to analyse the questions of optimal responses to a changing environment and participation and job search over the cycle. Section III concludes the paper with a brief summary.

Job Search and the Duration of Layoff Unemployment

This paper derives an optimal job-searching strategy for workers on layoff, and an optimal recall policy for firms, when each side anticipates the other sides actions correctly. It shows that workers search for an alternative job only if the probability of recall falls below a critical level, and that firms may recall before the recovery of demand, depending on the costs of laying off and hiring workers, and the probability of losing workers on layoff. Through the use of optimal job searching and recall policies, the paper derives expressions for the duration of layoff unemployment and discusses briefly their comparative-static properties.