ECO101H1 Chapter Notes - Chapter 13: Longrun, Efficiency Wage, Retool

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ECO101H1 Full Course Notes
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Suppose there are 25,000 unemployed persons in the economy. You are given the following data about the length of unemployment spells: 1. 00 where the exit rate for month t gives the fraction of unemployed persons who have been unemployed t months and who escape unemployment at the end of the month. Although only 20. 5 percent of workers are unemployed for 5 or more months, they account for 29,696 of the 58,616 (50. 7 percent) of months of unemployment. Most spells are short-lived, but workers in long spells account for most of the unemployment observed in this economy. Thus, the main problem is too many long spells. In total, 5,554,000 workers aged 20 years or older were unemployed in the u. s. in 2001. Of these, 40 percent, or 2,221,600 workers, were unemployed for less than 5 weeks; 32. 2 percent, or 1,788,388 workers, were unemployed between 5 and 14 weeks; 15. 5 percent, or 860,870 workers, were unemployed.

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