ABSTRACT
The labor market model introduced and used in Chapters 2 and 3 is one in which the labor market always “cleared.” In Figure 5.1 at wage rate W0, L0 workers want jobs and L0 vacancies are available. There is a worker for every job and vice versa. You might say that every unemployed worker and job vacancy has been cleared (or removed) from the market. This chapter looks at models where markets do not clear. Although market clearing models are adequate for many purposes, there are several rules, institutions, and practices that can keep labor markets from clearing for extended periods of time. Their ubiquity means that these factors play an important role in real world labor markets and the analysis of inequality, discrimination, poverty, and mobility.
