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Woodbury, Stephen A. --- "Unemployment" [2009] ELECD 419; in Dau-Schmidt, G. Kenneth; Harris, D. Seth; Lobel, Orly (eds), "Labor and Employment Law and Economics" (Edward Elgar Publishing, 2009)

Book Title: Labor and Employment Law and Economics

Editor(s): Dau-Schmidt, G. Kenneth; Harris, D. Seth; Lobel, Orly

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847207296

Section: Chapter 17

Section Title: Unemployment

Author(s): Woodbury, Stephen A.

Number of pages: 37

Extract:

17 Unemployment
Stephen A. Woodbury


1 Defining and measuring unemployment
For decades, unemployment posed an embarrassment for economic theory
because, as Davidson (1990) aptly notes, `the Walrasian assumption that
markets clear necessarily assumes away the possibility of unemployment'.
The near absence of theoretical guidance on the nature and definition
of unemployment made some comments by Sinclair (1987) remarkably
cogent: `Unemployment is like an elephant: easier to recognize than to
define. Definitions abound. Practices differ between countries, too; politi-
cians beset by a sharp rise in unemployment on a given definition sometimes
yield to the temptation to redefine their problem away.'
It would be cavalier and incorrect to suggest that, since the above obser-
vations were written, economists have come to fully understand unemploy-
ment or that unemployment is now a settled field within labor economics.
Nevertheless, the advances have been substantial ­ the definitions are
clearer, the explanations less ad hoc. As we will see, advances in data collec-
tion and the measurement of unemployment have generally led advances in
the economic theory of unemployment, although many economic theorists
would probably resist this suggestion.
This section begins with a typology of unemployment that labor
economists have used throughout the post-World War II period. It then
describes how unemployment is measured, a method that was pioneered in
the United States by the Bureau of Labor Statistics and has been gradually
accepted and adopted by most advanced Western economies. As will be
seen, the measurement of unemployment inevitably involved specifying a
definition ...