The labor market occupies center stage in modern theories of fluctuations. The most important phenomenon to explain and understand in a recession is the sharp decline in employment and jump in unemployment. This chapter for the Handbook of Macroeconomics considers explanations based on frictions...

We distinguish and assess three fundamental views of the labor market regarding the movements in unempoyment: (i) the frictionless equilibrium view; (ii) the chain reaction theory, or prolonged adjustment view; and (iii) the hysteresis view. While the frictionless view implies a clear...

The purpose of this paper is to distill the lessons for labour market reforms from the ?successes? and ?failures?. It begins by discussing the structural unemployment indicator which the OECD has used to identify the successful countries. This is followed by a review of the cross-country...