The Flow Approach to Labor Markets

Olivier Blanchard and Peter Diamond

No 4000, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The "flow approach" to labor markets builds up from the flows of workers and of jobs. It is based on three essential components, a specification of labor demand in terms of flows of job creation/destruction, a process of matching between workers and firms, and a process of wage determination where wages depend on the labor market prospects of employed workers and firms, We think that this approach gives the right basic picture of unemployment and unemployment dynamics, and of the relation between wage movements and the state of the labor market. The additional richness it naturally delivers also captures important implications of labor market mechanisms for macroeconomics. Finally, its structure is realistic enough to allow for a productive interaction with - and use of - micro-work and micro-evidence in both labor and product markets. This paper shows the structure of the approach and some of its implications. The first section develops a barebone model; the second adds the flesh.

Date: 1992-02
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

Published as American Economic Review Papers and Proceedings, May 1992, pp. 354-359

Downloads: (external link)
http://www.nber.org/papers/w4000.pdf (application/pdf)

Related works:
Journal Article: The Flow Approach to Labor Markets (1992)
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:nbr:nberwo:4000

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w4000

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().