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BackThe 2010 Nobel economics prize was this week awarded to two Americans and a British-Cypriot. The winners have made significant contributions to the understanding of the labour market. Their research looked into why unemployment remains high even at times when there are large number of job vacancies. The award is associated with a clear political signal – in future, the most urgent problems will happen on the labour market.
The most important understanding of the three researchers: anybody looking for a new job needs time, money and energy to find vacancies, which interest him or her. And an employer will be more assured that he has found a good employee if he or she has compared a few applicants. Until then, the vacancy remains unfilled. Starting from this basic idea, Diamond, Mortensen and Pissarides developed search and matching model. On the basis of this model it can be calculated how long market participants search to find the right "partner" on the other side. That way, they were also able to explain why an economy experiences unemployment, even if many vacancies exist.
The researchers also explain how the state influences decisions made by employees and employers: what is the rate of the minimum wage or how long unemployment benefit will be paid? But also how efficient the state organises employment services. Even now, many Member States are using the Diamond, Mortensen and Pissarides model. By awarding the Nobel prize to these researchers, it will certainly continue to gain in relevance and flow into the European debate.
The researchers also explain how the state influences decisions made by employees and employers: what is the rate of the minimum wage or how long unemployment benefit will be paid? But also how efficient the state organises employment services. Even now, many Member States are using the Diamond, Mortensen and Pissarides model. By awarding the Nobel prize to these researchers, it will certainly continue to gain in relevance and flow into the European debate.