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THE IMPACT OF YOUNG WORKERS ON THE AGGREGATE MARKET (Robert Shimer, 2001) by Mind Map: THE IMPACT OF YOUNG WORKERS
ON THE AGGREGATE MARKET
(Robert Shimer, 2001)
5.0 stars - 1 reviews range from 0 to 5

THE IMPACT OF YOUNG WORKERS ON THE AGGREGATE MARKET (Robert Shimer, 2001)

Baby Boom US

Past 50 years

Changes in unemployment rate

Perry 1970, predicted increase in 70s

Flaim & Gordon 80s, confirmed the increase, predicted an declines in 80s

Flaim & Shimer 90s, confirmed declines

Effects

Total 1.8% Increase before 1978

Total 1.45% Decline after

Detail, Direct - Aggregate Unemployment Rate, 0.84% increase 1954 - 1978, 0.81% decrease 1878 - 1998, can be precisely estimated, Indirect - Age Specific UR, Neoclassical Growth Model, Increase 0.96%, decrease 0.64%, harder to estimate

Critic, Macroeconomic Fluctuations, If young and old are complements

Contrary to Literature

"Not only arethe signs of these estimates contrary to the existing literature,but the magnitudes are enormous"

Literature

Mortensen and Pissarides 1994

Pissarides 2000

younger workers, and hence younger states, will have higher unemployment rates

Increase in youth share

Reduces the youth UR - Elasticity 1.5

Reduces the prime age UR - Elasticity 2

Possible Explanation

Explanation, On-the-job search, It becomes time-consuming for firms to locate the truly mobile workers when anybody is potentially interested in the job,, older workers are typically less mobile, this means hiring is easier in a younger economy, The presence of young workers generates a more fluid labor market

Labour Market Participation Increases

About

Increase in share of youth

causes - sharp reduction in that states unemployment rate - modest increase in labour force participation rate

inconsistent with many theories of the labour market

explained

by a model of frictional unemployment with on-the-job search

uses

the theory makes strong predictions regarding the behaviour of wages

compatible also with an apparently contradictory empirical evidence

Task of the Paper

Focus on data from US

This paper’s primary innovation is to focus on data from within the United States.

Develop a theory to explain findings

Standard Theories

Findings

Possible Explanation & it's Contradiction, younger people want to consume more, not the case because the growth is in manufacturing

Answer should lie in Supply, Search Model, Key Assumption, Result

Proof, Testable Implications, Interesting Prediction, Third Implication, Final Task

Notes

Youth Population = Age 16-24

Critic 1

The Author proved that the increase in demand is determined by Global Macroeconomic Fluctuations, but he didn't took in consideration that the same Fluctuations might be the answer for the "unexpected" increase in the labour utilization rate