Structural Unemployment, Underemployment, and Secular Stagnation

Ken-ichi Hashimoto, Yoshiyasu Ono and Matthias Schlegl

No 8318, CESifo Working Paper Series from CESifo

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.

Keywords: secular stagnation; underemployment; unemployment; labor market frictions; search and matching (search for similar items in EconPapers)
JEL-codes: E24 E31 E44 J20 J64 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp8318_0.pdf (application/pdf)

Related works:
Journal Article: Structural unemployment, underemployment, and secular stagnation (2023)
Working Paper: Structural unemployment, underemployment, and secular stagnation (2023)
Working Paper: Structural Unemployment, Underemployment, and Secular Stagnation (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8318

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().