ECON BC 3033x Lecture Notes - Lecture 7: Frictional Unemployment, Efficiency Wage, Price Floor
5 Oct 2016
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Metaphor friction for parking in city friction in labor market. Parking spots are indifferent, but you may not want the job offer. Has to be a double coincidence of wants. Not a bad thing, natural in the market. If no frictional unemployment (no openings, no search) no dynamic matching process, no mobility. More mobility in system closer households and firms can get to the best match. Unemployment insurance ppl will wait longer to find job since not as much incentive to look for job. Sectoral when industry goes out of business. Economy is looking for a new match of ppl and type of industry to replace the old. Creative destruction economy grows through unproductive firms shutting down & letting productive firms shine. Outputs break new l + k (inputs) entrepreneurs take those inputs & make their own output. If firms are picky about who they want more frictional unemployment. Prices lever to make sure s + d intersect.
