I discuss some extensions of the model that can increase cyclical unemployment volatility through mechanisms other than wage stickiness. Therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages. I summarize microeconometric evidence on wages in new matches and show that the key model elasticities are consistent with the evidence. Job creation in the model is influenced by wages in new matches. I study the cyclical behavior of an equilibrium search model with endogenous job creation and destruction, with focus the model’s failure to match the observed cyclical volatility of unemployment. Here is his very good 2009 Econometrica piece on wage stickiness, abstract: Garett Jones called this a prize for "relationship macro" and it also can be said that sophisticated versions of real business cycle theory are alive and well. This is a big victory for "not just Keynesian" visions of the labor market and macroeconomics more generally. Of the three winners, I think of Pissarides as the least Keynesian of the trio.
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The major continental economies failed to match UK performance because of institutional rigidities, despite low inflation expectations.įor the contrast with the Continent, see here and here. The decline of trade union power contributed to the control of wage inflation. I interpret the reform of monetary policy as an institutional change that reduced inflationary expectations in the face of falling unemployment. I argue that the key reasons are first the reform of monetary policy, in 1993 with the adoption of inflation targeting and in 1997 with the establishment of the independent Monetary Policy Committee, and second the decline of trade union power. Unemployment in Britain has fallen from high European-style levels to US levels. Here is his 2003 paper praising British labor market policy: He emphasized that point in today's phone interview. He has a very good paper on hysteresis and how originally short-term unemployment can worsen and persist. 1971 hett 1973 he sien Dokter an de London School of Economics makt. Here is his book on equilibrium unemployment theory. Christopher Pissarides wurr as Söhn vun Antonios un Evdokia Pissarides boren un studeer van 19 Wertschapswetenschapen an de University of Essex, wo he 1970 sien Bachelor un 1971 sien Master kreeg. His CV is here and he was born in Cyprus as a Greek Cypriot. He teaches at LSE and his home page is here. See my Mortensen post for his work with Mortensen, which encompasses some of his most important contributions.