American Economic Review: Vol. 90 No. 5 (December 2000)


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The Determinants of Equilibrium Unemployment

Article Citation

Yashiv, Eran. 2000. "The Determinants of Equilibrium Unemployment." American Economic Review, 90(5): 1297-1322.

DOI: 10.1257/aer.90.5.1297


The paper takes the search and matching model of the aggregate labor market to the data. It tests the model's empirical validity and employs structural estimation to generate a characterization of the optimal behavior of firms and workers. The model is applied to Israeli data that are uniquely suited for this kind of empirical investigation. The structural estimates are used to quantify the frictions embodied in the model, including the costs of search, the congestion and trading externality effects, and the matching process. A calibration-simulation analysis then studies the effect of several key variables on equilibrium unemployment.

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Yashiv, Eran (Tel Aviv U)

JEL Classifications

E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
J64: Unemployment: Models, Duration, Incidence, and Job Search

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