ABSTRACT
This chapter describes some of the models that can help to explain the unemployment experience of immigrants. It discusses three of the theories of employer behavior: implicit contracts, efficiency wages, and insider-outsider models. Conventional wisdom has for many years held that most unemployment was of short duration and was a normal part of labor market adjustments. Frictional unemployment can occur when the economy is technically at full employment levels, where labor demand equals labor supply. The human capital model, as simple as it is, has clear and important ramifications for immigrant labor market adjustment. Search theories, reservation wages, and part of the human capital model focus upon the behavior of workers, which is an attempt to explain voluntary unemployment. Search models usually focus on worker behavior as an explanation for unemployment, with inflexible or high reservation wages as a prime cause; most unemployment in these models is based on quits, voluntary to the worker but involuntary to the firm.
