Frictional Unemployment Research Articles

Information and entropy in the labor market: Frictional and involuntary unemployment and the neutrality of money

AbstractWe re‐examine the concept of involuntary and frictional unemployment and the neutrality of money in a statistical equilibrium model of the labor market in which boundedly rational workers' and employers' interactions have a non‐zero impact on wages. From this perspective both the degree of involuntary unemployment and the neutrality of money depend on the adjustment of both expectations of the average level of wages and prices and the further adjustment of anticipations of the scale of fluctuations in prices and wage offers. Shocks to the economy can produce new long‐run equilibrium levels of unemployment and short‐run increases in involuntary unemployment arising from unevenness in the adjustment of expectations.

Research on Predicting the Turnover of Graduates Using an Enhanced Random Forest Model.

The frequent turnover of college graduates is a key factor leading to the frictional unemployment and structural unemployment of youth, which are important research fields concerned with pedagogy, sociology, and management; however, there is little research on the prediction of college graduates' turnover. Therefore, this study investigated the turnover status of 17,268 college graduates from 52 universities in China, constructed and optimized a random forest model for predicting the turnover of college graduates, and analyzed the influencing mechanism of college graduates' turnover and the importance of influencing factors. The enhanced random forest model could deal with the unbalanced data and has a higher prediction accuracy as well as stronger generalization ability in predicting the turnover of college graduates. Individual background variables, job characteristic variables, and work environment variables are all important factors influencing whether college graduates resign or not. The top five factors that affect the turnover of college graduates by more than 10% are income level, job satisfaction degree, job opportunities, and job matching degree. The conclusion of this study is conducive to improving the accuracy of turnover prediction, systematically exploring the influencing factors of college graduates' turnover, and effectively guaranteeing the overall stability of youth employment.

The unequal effects of trade and automation across local labor markets

We quantify the joint impact of the China shock and automation of labor, across US commuting zones (CZs) in the period 2000–2007. To this end, we employ a multi-sector gravity model of trade with Roy-Fréchet worker heterogeneity across sectors, where labor input can be automated. Automation and increased import competition from China are both sector-specific; they lead to contractions in a sector’s labor demand and a decline in relative income for CZs more specialized in that sector, amplified by a voluntary reduction in hours worked and an increase in frictional unemployment. The estimated model fits well with the aggregate performance of manufacturing subsectors and with the variation across CZs in changes in average income, the hourly wage, hours worked, the employment rate and employment in manufacturing. By itself, the China shock has stronger distributional effects than automation, but its impact on aggregate gains is less than a third of automation’s impact.

Some Causes of Unemployment and Their Relationship with the Creation and the Destruction of Jobs.

There are substantial societal and economic consequences of unemployment. The effects of job creation and destruction on the unemployment rate are examined in this article. It considers job loss and re-employment rates to provide the authentic unemployment rate. Costs associated with looking for work and salary stagnation are the root causes of structural and frictional unemployment. After that, the article delves into the effects of unemployment, including less GDP, tax money, human capital, and welfare expenditure. Fiscal measures such as public expenditure and tax cuts, monetary easing via reduction to interest rates and the money supply, and structural changes to improve skills and labor mobility are all part of the policy solutions that are described to lessen the impact of these factors. This article delves deeply into unemployment’s origins, implications, and policy solutions. Long-term unemployment causes a lot of problems; therefore, solving them will need policies that are well-coordinated in the fiscal, monetary, and structural areas.

Estimating structural and frictional unemployment: An application of empirical mode decomposition

Estimating structural and frictional unemployment: An application of empirical mode decomposition

Chinas Employment Market during Covid-19 Pandemic: Stylized Facts, Policies and Prospect

With the outbreak of COVID-19, the world labour market had been seriously affected, especially in China. This essay is written aims to analyse reasons that give rise to various types of unemployment by elaborating specific economic phenomenons relating to them and the possible government policies that can relieve the difficulties of employment. From discussing the general trend of the market behavior and the problems derived from it, on the whole, consequence caused by frictional unemployment has the biggest scope. The research significance of this essay is to offer a better understanding of factors that play a vital role in creating the unemployment. In this way, knots of the matter are able to be distinguished clearly, which is beneficial to help government to design a more appropriate policy. Generally speaking, statistics during this pandemic depicts a relatively low rate of occupational mobility in China and the monotony of major industries. To alleviate the situation, government should pay attention to the training of reemployed labour such as providing a short stern schedule suitable for actual circumstances. In the meantime, a readjustment on the market to improve the efficiency of resource exploitation should also be taken into account.

Duration structure of unemployment hazards and the trend unemployment rate

This paper develops a new method to estimate the trend unemployment rate in which the duration profile of unemployment hazards is taken into account. The duration profile is characterized by three time-varying elements—level, slope, and curvature. The model also recovers the duration component of trend unemployment rate and the trend mean duration of unemployment. The estimated trend unemployment rate declines by about 3 percentage points between 1980 and 2019. Its short-term duration component decreases, whereas the long-term component increases, resulting in a rise in the trend mean duration of unemployment. The opposite trends in duration components suggest falling frictional unemployment but rising structural unemployment.

Incidence of the Digital Economy and Frictional Unemployment: International Evidence

ABSTRACT This paper is the first to quantify the relationship between the incidence of the digital economy and long-term frictional unemployment across countries. This paper contributes a novel approach to the literature that had been missing by focusing on the impact of the digital economy on unemployment across a global sample of countries . The resulting evidence indicates that there is a robust, negative partial correlation between national unemployment rates and the incidence of the digital economy, proxied by the share of the adult population that reports using the internet to pay bills. Further, the absolute values of OLS estimates of the partial correlation suggest that it might be higher for developing than high-income economies. Controlling for informal employment appears to be key for removing a positive omitted-variable bias in the estimate of the partial correlation between unemployment and the digital economy, which is due to a negative bivariate correlation between unemployment and informality, and a negative bivariate correlation between informality and the incidence of digital payment. The results from IV estimations suggest that the partial correlation between unemployment and digital payments is negative, with the absolute value of the estimates being larger than the absolute value of the OLS estimates.

Exploring the Impact of Robotisation on Economic Development

This paper speculates about the impact of robotisation on the world economy in the next 20 years. It is argued that though robotisation of sectors destroys jobs and thereby unleashes recessionary tendencies, Artificial Intelligence (AI) enables entrepreneurs, managers and workers to make more efficient use of their time and thereby leads to an increase in time available for consumption. We highlight that in any given sector, robotisation spreads because of its greater cost efficiency as compared to conventional production. But this development by itself would lead to a decline in relative prices of products supplied by a sector and through income effects stimulate consumption. Thus, in the wake of robotisation, the recessionary tendencies emerging from the destruction of jobs are pitted against the expansionary tendencies emerging from AI facilitated increase in consumption time and the mentioned fall in relative prices. Therefore, both increased and decreased economic activity are possible but a boom is likely, given increase in demand for time and labour-intensive services. Generation of frictional unemployment with labour shifting from rapidly robotising sectors to others and possible burgeoning inequality would necessitate globally coordinated basic income schemes funded by a global robot tax.

The Challenges of Sustainable Development in Employee Retention of Large-Scale Industries in West Bengal Through Decent Work Indicators

Purpose – The notion of sustainable growth was introduced at the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012. It was decided that developed countries' actions must support all the aims. The MDGs primarily addressed issues in underdeveloped and poor countries, whereas the SDGs also involve rich countries. MDGs assumed a ‘one-size-fits-all’ approach. The two most important factors of survival — the environment and development – are not adequately integrated. On the 25th of September 2015, the United Nations Sustainable Development Summit accepted the global agenda ‘Transforming Our World: the 2030 Agenda for Sustainable Development’. The purpose of the paper is to identify the proper retention strategy required for large scale industries in West Bengal in transition of change and to find the possibility of finding the scope of application of decent work indicators in large scale industries in West Bengal. Methodology - A total sample size of 607 participants from 22 large scale organizations in West Bengal is taken. Questions on decent work indicators are laid out on a five —point Likert scale. [5- Strongly Agree; 4-Agree; 3-Neither Agree nor Disagree; 2- Disagree: 1-Stronly Disagree]. The Secondary data had been collected from published and unpublished research works, research journals & reference books, magazines & Periodicals Newspapers, and websites, etc. This approach can be termed as doctrinal method of study. Results - The primary data reveal that decent work indicators can be used as important criteria for employee retention. This new approach has not been touched by earlier researchers. The objective of decent work is to improve the organization's capacity to handle its internal and external functioning and relationships. All discriminatory practices, unacceptable work conditions and violence including gender-based violence should be abolished. This helps in generating employee trust, belongingness towards organization. These practices are helpful for employee retention in large scale industries. This is growth of informal employment in regular wage category in organized and large-scale industries in West Bengal which is called as ‘formal informalization’. Practical application – Labor market uncertainties grew at a rapid pace in developing countries like India. Formal sector jobs had not been created at satisfactory pace and labor force migration took place towards informal sector. The new challenges have evolved due to rapid globalization in India. Frictional unemployment grew at a great pace in large scale industries in West Bengal. Development of proper decent work system under sustainable development agenda can create protection in the event of changes in economy and society, can reduce fear of change and can improve gainful and productive full employment in an economy.

Frictional unemployment, bargaining, and agglomeration

Frictional unemployment, bargaining, and agglomeration

A 15-Year Ecological Comparison for the Hiring Dynamics of Minnesota Pharmacies between 2006 and 2020.

Labor market forces in pharmacy are affected by frictional unemployment (job turnover), structural employment forces that require new skill sets for employees, and hiring practices that integrate technology or less costly labor such as pharmacy technicians. The objectives of this study were to describe hiring trends for both the pharmacist and technician workforces in licensed pharmacies on a biennial basis from 2006 through 2020 using data collected in Minnesota. Ecological comparisons were made between the survey years using descriptive statistics. For open-ended questions added to the 2020 survey, content analysis was applied. Demand for technicians increased which might be due to the expansion of their roles into activities that had been reserved for the pharmacist. Pharmacies reportedly would like to hire pharmacists to meet the demand for new services that pharmacists can provide. However, respondents articulated that this is not feasible under current economic pressures. This represents a lost opportunity for transformation in pharmacy that would establish pharmacists’ roles in the rapidly transforming health care value chain. We conclude that hiring dynamics in pharmacies are being driven more by economic and organizational shifts than meeting the demand for services that pharmacists can provide.

A World without Work

A World without Work

The Unequal Effects of Trade and Automation across Local Labor Markets

We quantify the joint impact of the China shock and automation of labor, across US commuting zones (CZs). To this end, we employ a multi-sector gravity model of trade with Roy-Frechet worker heterogeneity across sectors, where labor input can be automated. Automation and increased import competition from China are both sector-specific; they lead to contractions in a sector's labor demand and a decline in relative income for CZs more specialized in that sector, amplified by a voluntary reduction in hours worked and an increase in frictional unemployment. The estimated model fits well with the aggregate performance of the manufacturing subsectors and with the variation across CZs in changes in average income, the hourly wage, hours worked, the employment rate and employment in manufacturing. The China shock contributes almost as much as automation to the distributional effect of the combined shock, but its impact on aggregate gains is less than half of automation's impact.

Labour market institutions in open economy: Sectoral reallocations, aggregate adjustments, and spillovers

AbstractWe introduce frictional unemployment in a multiworker heterogeneous firm model with a dynamic matching process, one‐ and two‐sector equilibria, and international markets. A change in labour market policies transforms the share of exporters and affects average productivity. The closure of equilibrium with or without sectoral arbitrage plays an important role in generating macro‐level outcomes for employment subsidies. Unemployment benefits, on the other hand, make unemployment and openness rise, independently of sectoral reallocations. We also find that simultaneous implementation of labour market policies remove potential gain in the trade share, and, when it comes to unemployment benefits, may even be detrimental.

Trade and Frictional Unemployment in the Global Economy

Abstract We develop a multicountry, multisector trade model featuring risk-averse workers, labor market frictions, unemployment benefits, and equilibrium unemployment. Trade opening leads to a reduction in unemployment when it simultaneously raises welfare and reallocates labor toward sectors with lower-than-average labor market frictions. We then estimate and calibrate the model using employment data from 31 OECD countries and worldwide trade data. Finally, we quantify the potential unemployment, real wage, and welfare effects of repealing NAFTA and raising bilateral tariffs between the United States and Mexico to 20%. This policy would increase unemployment by 2.4% in the United States and 48% in Mexico.

Trade and Welfare (Across Local Labor Markets)

What are the welfare implications of trade shocks? We provide a sufficient statistic that measures changes in welfare, to a first-order approximation, taking into account adjustment in labor supply, in frictional unemployment, and in the sectors to which workers apply while allowing for arbitrary heterogeneity in worker productivity and nonpecuniary returns across sectors. We apply these insights to measure changes in welfare across commuting zones (CZs) in the U.S. between 2000-2007. We find that granting China permanent normal trade relations lowers the welfare of a CZ at the 90th percentile of exposure by 3.1 percentage points relative to a CZ at the 10th percentile; of this, approximately 65 percent is due to changes in unemployment and much of this is driven by the non-pecuniary costs of unemployment. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Incorporating Unemployment into the GTAP Model

This paper documents the development of a labor module that incorporates job-search frictions, to introduce unemployment into the standard GTAP model. In this approach, unemployed individuals must search for a job opening and firms that want to hire must search for a worker to fill the job. To illustrate the potential value of a GTAP model with frictional unemployment, the impacts of a 25 percent increase in U.S. tariffs on metal products (e.g., ferrous and non-ferrous metals) are simulated. While employment of skilled and unskilled labor increases in the U.S. metals sector, employment of both types of labor declines in U.S. manufacturing and services sectors. These decreases in employment offset the increase in the metals sector, leading to a 0.8 percent increase in the unemployment of unskilled labor and a 1.5 percent in the unemployment of skilled labor. These increases would translate to a 0.1 percent point increase in the unemployment rate in the U.S. labor market. A potential barrier to wider use of a the GTAP model with unemployment is the availability of job separation or turnover rate data in regions other than the United States. In the example simulation, job turnover rates, and thus the initial levels of matched labor in the non-U.S. regions are assumed to be the same as for United States.

Frictional unemployment with stochastic bubbles

We show that the volatility puzzle in labor economics (Shimer, 2005) stems from the inability of technology shocks to generate sufficient volatility of firm value. We introduce non-fundamental shocks to firm value, akin to bubbles, into an otherwise standard search-and-matching model. When calibrated to stock market data, stochastic bubbles significantly improve the ability of the matching model to quantitatively explain the volatility of the US labor market. An extension with multiple sectors improves the persistence of simulated labor market variables.

Job search costs and incentives

We demonstrate that policies aimed at reducing frictional unemployment may lead to the opposite results. In a labor market with long-term wage contracts and moral hazard, any such policy reduces employees’ opportunity costs of staying on a job. As employees are less worried about losing their job, a smaller share of employees is willing to exert effort, leading to a lower average productivity. Consequently, firms create fewer vacancies, resulting in lower employment and decreased welfare.