Structural unemployment, underemployment, and secular stagnation

Ken-ichi Hashimoto, Yoshiyasu Ono and Matthias Schlegl

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: In this paper, we show that underemployment and not necessarily high unemployment becomes the main measure of economic slack in the labor market under secular stagnation. Specifically, involuntary underemployment in the form of a persistent shortfall of working hours occurs in the search and matching model, provided that households derive utility from holding wealth, and quickly dominates the total employment gap under stagnation. Conventional policy measures aimed at reducing unemployment may increase the labor market gap through their effects on underemployment and should be used with caution. In contrast, positive demand shocks improve unemployment and working hours, while increases in potential output worsen both (“paradox of toil”). Our analysis provides new insights into empirical puzzles such as Japan's seemingly decent employment record during its lost decades.

Date: 2020-05, Revised 2023-01
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Citations: View citations in EconPapers (10)

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https://www.iser.osaka-u.ac.jp/static/resources/docs/dp/2020/DP1088RRR.pdf

Related works:
Journal Article: Structural unemployment, underemployment, and secular stagnation (2023)
Working Paper: Structural Unemployment, Underemployment, and Secular Stagnation (2022)
Working Paper: Structural Unemployment, Underemployment, and Secular Stagnation (2022)
Working Paper: Structural Unemployment, Underemployment, and Secular Stagnation (2021)
Working Paper: Structural Unemployment, Underemployment, and Secular Stagnation (2020)
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