Labor Supply and the Equilibrium Rate of Unemployment

Troels Østergaard Sørensen
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Troels Østergaard Sørensen: Institute of Economics, University of Copenhagen

No 91-20, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: The rate of growth of labor supply will decline or even become negative in many countries in the 1990s, and the main question in the paper is, whether this development by itself will reduce the equilibrium rate of unemployment. Labor market mismatches are imposed on a dynamic macro model, and effects on the unemployment rate from different labor supply shocks are analyzed. The main results of the model are that a decrease in the rate of growth of labor supply will reduce the equilibrium rate of unemployment, but policy schemes to reduce the level of labor supply has no permanent effects. The robustness of the results are discussed.

Pages: 15 pages
Date: 1991-12
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9120

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