Unemployment and Macroeconomics

Abstract

This paper discusses some issues in the theory of unemployment; proposes a framework for the analysis of unemployment; and applies the framework to the analysis of the rise in unemployment in Britain after 1979. The framework is based on bilateral monopoly in the labor market and the explanation for the rise in unemployment in Britain rests primarily with a demand-side shock, which caused the rise in 1980-81, and supply-side persistence, which has kept unemployment up since then. Copyright 1989 by The London School of Economics and Political Science.