In this lecture, we discussed the importance of understanding unemployment in macroeconomics. We examined data to motivate the use of the matching function and discuss its theoretical properties. We explored why unemployment is such an important problem, noting the various ways in which it affects the lives of individuals and economies.
When thinking about microeconomic issues, three topics are often mentioned: growth domestic product (GDP), inflation, and unemployment. GDP growth is not a striking problem in developed economies, and inflation has become more stable. This leaves us with the problem of unemployment.
Job loss is a deeply personal experience, as it often affects someone's identity, wellbeing, and sense of purpose. Well-being surveys have consistently shown that unemployment is one of the most costly life events, alongside divorce and the death of a family member. Unemployment also represents a waste of resources, as available workers are not being used.
To understand and reduce unemployment, we use the matching function. The matching function is a tool used to study labor markets and macroeconomics in advanced economies. It is designed to adapt to the different histories and institutions of each country.
Unemployment is an important issue in macroeconomics because of its personal and economic impact. We use the matching function to understand and reduce unemployment, as it is designed to adapt to the different histories and institutions of each country.