chapter  14
19 Pages

THE LABOUR MARKET: UNEMPLOYMENT AND SEARCH THEORY

WithDavid Sapsford

Unemployment and search are two areas of economics which have each spawned a large, and still rapidly growing, literature. Inevitably, therefore, in this chapter we can do little more than introduce the reader to a selection of the major issues involved and advances in knowledge achieved in each of these important areas. We begin with a discussion of the nature and causes of unemployment, and in Section 14.3 we provide a brief discussion of the historical origins of the economics of search and present some simple models of labour market search. In Section 14.4 we explore the consequences of relaxing some of the restrictive assumptions on which the simple models of the previous section are based. In Section 14.5 the analysis of the preceding sections is used to investigate the contributions which search theory has made to improving our understanding of certain aspects of the unemployment problem, and a brief review of the relevant empirical evidence is provided. In the final section we offer some concluding remarks.