Truefalseuncertain suppose there are two economies a and b...

True/False/Uncertain Suppose there are two economies, A and B. Economy A suffers from a high degree of skills mismatch between workers and firms, while the mismatch problem is less severe for Economy B. Then the steady-state unemployment rate is higher in Economy A than in Economy B because the fraction of employed workers who lose their jobs and become unemployed is higher in Economy A than in Economy B.

Transcript

00:01 So here we've got a question about labor market search.

00:04 And before i get into this idea of mismatch, let's set up the labor search model formally, right? so labor search equilibrium is defined in a particular way, right? it's where job finders are equal to job levers, right? that's equilibrium.

00:29 If more people are finding jobs than are leaving jobs, obviously the state of the laborers.

00:34 Market is changing right unemployment is coming now and if a lot more people are leaving jobs and finding jobs unemployment is going to be trending up so let's define some terms the u can be the number unemployed i'm going to call e the number of employed i'm going to call l the number in the labor force which is u plus e we're going to call f the finding rate the rate at which people find to jobs if they're unemployed.

01:08 We're going to call s the separation rate, which is the rate at which people quit jobs or leave jobs or are fired from jobs or retire from jobs if they're employed.

01:20 And now if i'm going to rewrite this in terms of algebra, well, there are you people unemployed and they find rates at rate f.

01:29 So if we have a million unemployed and 20 % of them find a job, we can tell how many people are entering jobs.

01:36 The number of people are, the number of job leavers is the employed times the separation rate, right? it's the number of people have jobs times the rate at which they leave.

01:45 Now, these two things are usually treated as constants or parameters of the model, right? these things here are the variables.

01:57 So let's rewrite this in terms of the unemployment rate, right? because we're talking about the unemployment rate.

02:02 Well, if i invoke the definition of the labor force, i can rewrite this as l minus u times s, right? the employed is everyone in the labor force minus the unemployed.

02:16 I've now reduced it to u and l...

Question

Please give Ace some feedback