Evaluating the Role of Labor Market Mismatch in Rising Unemployment

15 Pages Posted: 15 Nov 2011

See all articles by Gadi Barlevy

Gadi Barlevy

Federal Reserve Bank of Chicago; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: July 28, 2011

Abstract

This article shows how much a shock to the ability of firms to hire qualified workers accounts for the rise in unemployment. Using a matching function approach, the author finds that such a shock implies an unemployment rate of no more than 7.1 percent, much below the actual unemployment rate during the past two years. Hence, the recent patterns in unemployment and vacancy data do not necessarily rule out a role for monetary policy, which works by encouraging firms to hire more.

Keywords: Beveridge curve, mismatch, matching function, Mobility, Unemployment, and Vacancies, Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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JEL Classification: E60, J60

Suggested Citation

Barlevy, Gadi, Evaluating the Role of Labor Market Mismatch in Rising Unemployment (July 28, 2011). Economic Perspectives, Vol. XXXV, No. 3, 2011, FRB of Chicago Working Paper No. 3Q/2011, Available at SSRN: https://ssrn.com/abstract=1959381

Gadi Barlevy (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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