The award will continue this important line of research on the dynamics of wages and unemployment in labor markets characterized by the disappearance of old jobs and creation of new ones. This is a dimension of labor market dynamics that has not received much attention in macroeconomics; yet, it is essential to analyzing a number of central issues in macroeconomics such as inflation and price setting and the dynamics of aggregate employment. The authors have already developed an explicit model of the flows of workers in labor markets with continual job creation and job destruction; derived the implied behavior of the major aggregates, unemployment, and job vacancies; and begun constructing a wage determination model in decentralized markets. This continued research will extend the theoretical models of labor dynamics and will involve additional empirical work using Canadian employment data which tends to be of higher quality than available US data. The authors will also continue to analyze the US employment data. This research is important because it will provide a better basis for understanding the persistance of high unemployment rates which have plagued the US and other developed economies to various degrees over the past twenty years.
