Work

Declining Search Frictions, Unemployment and Self-Employment

Year: 2023

Type: article

Abstract: In most OECD countries, unemployment rates show no trend, which is puzzling if advancements in information and communication technologies decrease labour-market frictions. We show, both analytically and quantitatively, that accounting for the secular decline in self-employment rates solves the puzzle. While declining labour-market frictions can theoretically explain these trends, we provide contradictory causal evidence that the roll-out of broadband internet has increased self-employment and decreased unemployment rates. We reconcile these observations with a new model featuring frictions in both labour and goods markets. We explain falling self-employment and non-trending unemployment quantitatively by labour-market frictions declining relatively more than goods-market frictions.

Source: The Economic Journal

DOI: 10.1093/ej/uead093

Authors: Piotr Denderski, Florian Sniekers

Institutions: University of Leicester, Instytut Nauk Ekonomicznych, Polish Academy of Sciences, Tilburg University

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,855