Significance of concept and theory of search unemployment, Managerial Economics


From what has been  said earlier, you understand the significance of the theory of search  unemployment  as  an  attempt to endow realism  to the  elegant neoclassical model of employment and output. You  should also understand the practical significance of the concept of search unemployment as it has worked itself out  in  the United  States and  in  some  of  the  countries of the  European Union. 

The idea of search unemployment gained importance in the US economy in  the 1990s when the social security system was being restructured  in that country. It is easily understandable that  the ability and desire of a person to keep  looking for a better  job  and to remain unemployed  in the mean time depends in part on the availability of  unemployment  benefits  under  such  a system. The unemployment that arises when a person quits a job  to have more time to  look for a better job,  or when an unemployed delays accepting a job  in  the hope of finding a better one, is of course the search unemployment that we have been discussing.  If all  jobs are the same, an unemployed person will take the first one offered.  If  some jobs  are  better  than  others,  it is  worthwhile.  searching  and waiting for a good one. The higher the unemployment benefits, the more likely people are to keep searching for a better job, and the more likely they are to quit their current job to try to find a better one. It was consideration of these kinds that  prompted the  United  States  to  restructure their  unemployment  benefits system in the 1990s. If unemployment rates in the European Union are by  and large higher than  those prevailing in  the United States in recent years, part  of the explanation is the fact  that  it is  not as easy, as  in the  countries of  the European Union, to obtain unemployment benefits in the United States after the revamping of  their unemployment benefits system. 

Posted Date: 10/26/2012 6:29:49 AM | Location : United States

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