THE IMPACT OF YOUNG WORKERS ON THE AGGREGATE MARKET (Robert Shimer, 2001)
1. Baby Boom US
1.1. Past 50 years
1.2. Changes in unemployment rate
1.2.1. Perry 1970
1.2.1.1. predicted increase in 70s
1.2.2. Flaim & Gordon 80s
1.2.2.1. confirmed the increase
1.2.2.2. predicted an declines in 80s
1.2.3. Flaim & Shimer 90s
1.2.3.1. confirmed declines
1.3. Effects
1.3.1. Total 1.8% Increase before 1978
1.3.2. Total 1.45% Decline after
1.3.3. Detail
1.3.3.1. Direct - Aggregate Unemployment Rate
1.3.3.1.1. 0.84% increase 1954 - 1978
1.3.3.1.2. 0.81% decrease 1878 - 1998
1.3.3.1.3. can be precisely estimated
1.3.3.2. Indirect - Age Specific UR
1.3.3.2.1. Neoclassical Growth Model
1.3.3.2.2. Increase 0.96%
1.3.3.2.3. decrease 0.64%
1.3.3.2.4. harder to estimate
1.3.4. Critic
1.3.4.1. Macroeconomic Fluctuations
1.3.4.2. If young and old are complements
2. Contrary to Literature
2.1. Literature
2.1.1. Mortensen and Pissarides 1994
2.1.2. Pissarides 2000
2.1.3. younger workers, and hence younger states, will have higher unemployment rates
2.2. Increase in youth share
2.2.1. Reduces the youth UR - Elasticity 1.5
2.2.2. Reduces the prime age UR - Elasticity 2
2.2.3. Possible Explanation
2.2.4. Explanation
2.2.4.1. On-the-job search
2.2.4.2. It becomes time-consuming for firms to locate the truly mobile workers when anybody is potentially interested in the job,
2.2.4.3. older workers are typically less mobile, this means hiring is easier in a younger economy
2.2.4.4. The presence of young workers generates a more fluid labor market
2.2.5. Labour Market Participation Increases
3. About
3.1. Increase in share of youth
3.2. inconsistent with many theories of the labour market
3.3. explained
3.3.1. by a model of frictional unemployment with on-the-job search
3.4. uses
3.4.1. the theory makes strong predictions regarding the behaviour of wages
3.4.2. compatible also with an apparently contradictory empirical evidence
4. Task of the Paper
4.1. Focus on data from US
4.2. Develop a theory to explain findings
4.2.1. Standard Theories
4.2.2. Findings
4.2.3. Possible Explanation & it's Contradiction
4.2.3.1. younger people want to consume more
4.2.3.2. not the case because the growth is in manufacturing
4.2.4. Answer should lie in Supply
4.2.4.1. Search Model
4.2.4.2. Key Assumption
4.2.4.3. Result
4.2.5. Proof
4.2.5.1. Testable Implications
4.2.5.2. Interesting Prediction
4.2.5.3. Third Implication
4.2.5.4. Final Task