The sharp and persistent rise in unemployment in advanced economies since the 2008-09 financial crisis is a hotly debated policy issue. Rightly so: High persistent unemployment has major human and economic costs, from loss of morale to loss of skills. More broadly, it seems to undermine the very fabric of society.
Against this backdrop, the theme for the IMF's 13th Jacques Polak Annual Research Conference, “Labor Markets through the Lens of the Great Recession,” could not be timelier. This year’s conference program weaves together a number of contributions by researchers both inside and outside the IMF, aiming to shed light on those labor market issues that are central to the current economic and social landscape.
Cyclical vs. structural
Peter Diamond, Nobel Prize winner in Economics and Professor of Economics at MIT, will give the keynote Mundell-Fleming lecture on the controversial issue of cyclical vs. structural unemployment.
Peter will explore whether and how we can use the information contained in two widely used tools, the Beveridge curve relation between unemployment and vacancies, and the matching function, which relates hires, unemployment, and vacancies. His contribution will help us understand both the usefulness but also the limits of these tools, and give clear indications on how we should extend our research in the future.
The remainder of the program consists of 12 papers on key dimensions of labor markets and income distribution, and on the role of trade and financial globalization in labor market outcomes around the globe.
Just to give you a flavor of what to expect, here are some of the questions that we will be discussing:
- Has the relationship between employment and output growth (the so-called “Okun law”) changed in recent years? To what extent is such a relationship stable over time and significantly homogeneous across countries?
- What is the role of skills mismatch in unemployment? Is the Beveridge curve shifting significantly over time and, if so, how do social policy (namely, unemployment insurance) and skill mismatch account for such shifts?
- What is the relationship between growth and income and wealth inequality? Do rising top income shares exacerbate economic fragility? And if so, how far should and could fiscal policy go in trying to mitigate it?
- Do contractionary monetary policies systematically increase inequality in labor earnings and consumption?
- How far does imperfect financial intermediation help explain fluctuations in employment and asymmetries in job creation between small and large businesses?
- How large has been the impact of trade integration with large emerging markets (China, India, and others) on employment and income distribution in advanced countries?
- What are the stylized facts about fast employment recovery “miracles”? Do recoveries tend to benefit more those who lost their jobs in the first place through “employment recalls” at the expense of new entrants in the labor force? How crucial have been labor market reforms and regulation in fostering employment recoveries?
In addition to the Mundell-Flemming lecture, the conference will feature two other events. George Akerlof – Nobel Prize winner in Economics and Senior Advisor in the IMF Research Department– will deliver the opening remarks to the conference, sharing his views on the nature of unemployment and main trade-offs in job creation policies.
The conference will conclude with an Economic Forum on “Policies and Jobs.” A panel of experts, Ricardo Hausmann (Harvard University and former finance minister of Venezuela), Adriana Kugler (chief economist of the U.S. Department of Labor), Lawrence Katz (Harvard University), and Martin Rama (head of the World Bank 2013 WDI report on jobs), will discuss current labor market policy choices both in advanced and in emerging countries.
As in the past, we hope that research presented at this conference will contribute to new policy thinking here at the IMF and elsewhere, and that you can find time to read the papers posted online, and via the broadcast of the Economic Forum at www.imf.org or by commenting here.