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Law of motion for unemployment

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Reference no: EM131901782

A question on labour market.

Obtain an expression for the equilibrium (steady state) unemployment rate u* based on the law of motion for unemployment in a two-state model where the aggregate job finding rate is ft , the exogenous job breakdown rate is st , and workers subject to job loss have a chance of instantaneously finding a job at the usual job finding rate. Interpret the difference between this equilibrium unemployment rate and one arising in a model where individuals cannot obtain a new job in the same period if fired.

Reference no: EM131901782

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