Labour market specialists win Nobel Economics Prize.
Three labour market specialists, including one blocked for a top post at the US Federal Reserve, won the 2010 Nobel Economics Prize for research that has had an impact on employment reforms worldwide.
The Nobel jury said that the work of Peter Diamond and Dale Mortensen of the US and British-Cypriot Christopher Pissarides helped resolve puzzles such as why people remained unemployed despite a large number of job openings.
It lauded the three economists for their analysis of markets with search frictions, which helps explain how unemployment, job vacancies and wages are affected by regulation and economic policy.
The three winners have had a big impact on how policy makers view benefits for the unemployed and what best can be done to get them back into jobs. They show that you can improve the system if unemployment benefits are accompanied by sanctions for those who do not actively look for work as well as by policies that ease the transition back to work, such as training and councelling.
The laureates work helps us to understand why an increase in wages gives an increase in employment, contrary to what might be expected.. In other words, more workers are encouraged to look for work by higher wages.
According to traditional theory, markets should work on their own to ensure that job seekers find available jobs. The Diamond-Mortensen-Pissarides model however, shows that markets do not always function that way and helps explain why unemployment persists and proves stubbornly resistant even when economic circumstances improve.
In a way People Management and our profession are recognized again as one of the cornerstones of economy. We can be proud.
Pieter Haen
President EAPM
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