1 

Current Theories in Economics and Their

Application to the Development of
A Roadmap for Employment

Prepared by

Brian Lewis

December, 2010
 2 
 

TABLE OF CONTENTS

Executive Summary 3

Graph – Complex Labor Economic Relations 4

Introduction 5

Press Release Announcing 2010 Economic Science Nobel Prize 6

Search Theory and Its Applicability 6

Job Creation and Job Destruction 7

Employment and Unemployment Policy and Regulatory Analytics 8

Preserving Economic Mobility -- Social Welfare Policies 10

Government – Public Sector – Private Employment General

Considerations (MENA Country Analysis) 12

Human Capital 13

Conclusion 14

Bibliography 15
 3 
 

EXECUTIVE SUMMARY

Saudi Arabia is poised to make its mark beyond oil and gas on the world rostrum. Its wealth
requires careful placement in the development of human resources to serve its growth and future.

The 2010 Nobel Laureates in Economic Science offer a roadmap for development of analytics
for policy development to address job creation and sustainable economic growth. What lies at
the heart of the Laureates writings is the importance of dense data of economic activity and
performance.

A detailed report to provide an overview-analysis of the complex economic writings of the 2010
Economic Laureates writings has been prepared and will be submitted if requested. The Index
on the previous page provides an overview of the topic headings therein discussed.

That more exhaustive report imparts a framework of the analytic collection analysis for the
development of foundational policies and regulations. The incorporation and implementation of
the theories advanced by the Laureates provides the basis for transparency indices that facilitate
strong policy and regulatory development and sustainable economic development.

The multifaceted web of analytics on the following page visually depicts the important factors
for policy and regulatory consideration. Answers and programs to identify and overcome causes
of unemployment, according to the Laureates must consider this complex of relations to develop
policies for job creation and programs promoting social stability.

Analysis of workforce productivity in the public sector reveals strong reason to promote private
sector growth and employment expansion. This information and data provides clear reason to
expand economic development and reduce public sector employment.

The included bibliography to this summary overview includes the a listing of the major writings
of the Laureates which have been reviewed and analyzed in the preparation of this summary
report as well as the more detailed report. Contained in these writings are extensive economic
algebraic expressions for both identification and analysis of important analytical measures to
strengthen the understanding and transparency of the economic activities and their inter-
workings at a governmental level.
 4 
 
Years Worked  Capital 
  Total  Human 
Population  Capital  Movement 
Population   
Demographics 
  Experience/Wages Productivity 
Gender 
  Unemployment 

Population      Government 
  Age  Density  Employment 
Education Work    
  Hours 
Widows 
  Wage 
Survivor  Dispersion  Private 
  Benefits  Employment 
  Minor 
Children 
 

Government 
 
      Policy             
   

Job  Job 
Creation  Destruction 
Government 
Regulations 
Friction  Economic  
Growth 

Health  Social 
Insurance  Taxation
Welfare 

Unemployment  Minimum 
Insurance  Wage  Training  Employment      Funding for 
Programs  Credits  Retirement 

Search Theory Applied to Labor Markets According to  Retirement 
the 2010 Nobel Prize for Economic Science, requires  Benefits 
consideration and Inclusion of these variables and 
analytics 
 5 
 

INTRODUCTION

The simplified explanation of the theories recognized by the award of the2010 Nobel Prize for
Economic Science is that it takes time to search for a new job and that a variety of personal and
business concerns require answers before the search ends in the offer and acceptance of a new
job.

This simplistic statement expands to an extensive web of complexity for those involved in policy
formulation to understand and incorporate into their thinking processes.

To achieve optimal understanding to develop policies and programs for sustainable economic
prosperity, improvement of analytical tools and measures is necessitated. Implementing these
steps will reduce the impact of turbulence by embedding insights to drive actions and deliver
value. In addition, this will provide for development of alternative scenarios and simulations for
both immediate guidance on best actions to take and support strategic planning and policy
formation.

Prioritizing future investments to bolster human capital and sustainable economic growth imparts
achievement of long-term advantage.

Knowing what happened and why it happened is no longer adequate.

Organizations need to know what is happening now, and what is likely to happen next so to be
able to know what actions should be taken to obtain optimal results.

Surprisingly, common intuition regarding a variety of different parameters and analytics

identified by the 2010 Economic Laureates is contrary to the analytical conclusions reported in
their extensive writings.

These intuitive beliefs create barriers for adoption of the analytic requirements from a
management and cultural perspective rather than as a result of a lack of data or technology.

For these reasons, those involved in policy formation need understand and convey programs to
establish and achieve the important needs for development and implementation of the required
analytical support on these complex parameters of economic measure.

The intent of this report on the extensive papers reviewed of the 2010 Economics Laureates is
the view that the reader(s) be able to then formulate appropriate questions and define insights
applicable to meet objectives and address challenges of their respective organization(s).

These steps of question formulation and formation facilitate the identification of pieces of data
needed and reduce time that might otherwise be misspent compiling unnecessary data.

The chart on page four visually presents the complex web identified by the 2010 Economic
Science Laureates in their extensive writings identifying and quantifying search frictions.
 6 
 

The subsequent pages of this report develop an overview of these detailed analysis and algebraic
expressions of economic insights which have been reviewed in preparation for this report. A
bibliography is then attached from which the reader(s) and their staff can obtain further
information and support as required.

Press Release  11 October 2010 (excerpted) 

The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in
Economic Sciences in Memory of Alfred Nobel for 2010 to Peter A. Diamond Massachusetts
Institute of Technology; Dale T. Mortensen Northwestern University; and Christopher A.
Pissarides London School of Economics and Political Sciences

"for their analysis of markets with search frictions"

Why are so many people unemployed at the same time that there are a large number of job
openings? How can economic policy affect unemployment?

The Laureates' models help us understand the ways in which unemployment, job vacancies, and
wages are affected by regulation and economic policy. This may refer to benefit levels in
unemployment insurance or rules in regard to hiring and firing. One conclusion is that more
generous unemployment benefits give rise to higher unemployment and longer search times. 1

Search Theory and Its Applicability

A key breakthrough was to realize that the problem was not how to explain unemployment per se
but rather how to explain hiring, firing, quits, vacancies and job search and to think of
unemployment as the result of all of this underlying microeconomic behavior. The
underlying behavior involves not just workers looking for jobs but also employers looking for
workers so explaining unemployment would require a theory of job search, worker search and
matching and each aspect of the theory would have to be consistent with every other aspect; i.e.
how much workers search depends on how much employers are searching (e.g. advertising) and
vice-versa and also on the quality of matching and all of these considerations need to be
addressed together.

Professor Diamond brings concern for risk, and stability conditions, and dynamic and broader
conditions. There is a strong emphasis on the ability of government to implement welfare-
improving schemes of the sort found in social democracies. The approach is quite technocratic --
solve and advise. Public choice and political economy considerations take a back seat.

Diamond’s 1982 paper on aggregate demand argues that the result of actually modeling a
competitive economy with trade frictions is to find multiple natural rates of unemployment. This
implies that one of the goals for macro policy should be to direct the economy toward the best
                                                            
1
  Nobel Prize, http://nobelprize.org/nobel_prizes/economics/laureates/2010/press.html, October 11, 2010 
 7 
 

natural rate (not necessarily the lowest) after any sufficiently large macro shock. 2 3 Professor
Mortensen concurred. 4 5 Professor Pissarides expanded the ideas of search theory in subsequent
writings. 6

These complex variables provide a more detailed understanding of the frictions that occur in
labor search analysis. The quantitative implications of labor-market search were found to
improve the “model” empirical performance along several dimensions.

Job Creation and Job Destruction

A job vacancy indicates a willingness by a firm to hire a worker. It is equivalent to

unemployment of capital, so just as workers move between the states of employment and
unemployment, jobs move between the states of occupancy and vacancy. 7

Important questions identified include:

• To what extent do cross firm productivity differences reflect differences in
labor force quality?
• Does the market reallocate resources from less to more productive firms?
• What is the relationship between the reallocation process, labor turnover,
and unemployment?
• Do productivity differences contribute to earning inequality?
• What is the cross section relationship between firm productivity and firm
size?
• Is productivity growth associated with exit and entry and what fraction can
be attributed to reallocation?
• Do more productive firms grow faster?
• Does the competitive process select the most productive new firms for
survival? 8

These questions establish important parameters for consideration in policy formation.

                                                            
2
Diamond, Peter. A., “Aggregate Demand Management in Search Equilibirum,” The Journal of Political Economy, Vol. 90,
Issue 5, (Oct. 1982), 882.

3
Diamond, Peter, “Wage Determination and Efficiency in Search Equilibrium,” Review of Economic Studies, (1982) XLIX, 217,
The Society for Economic Analysis 1982.
4
Mortensen, Page 9 
5
Mortensen, Dale T., et. al, “More on unemployment and vacancy fluctuations,” Review of Economic Dynamics 10, (2007.,
Page 328
6
Pissarides, Christopher A., “Scale Effects in Markets with Search,” Oct. 2002, Page 19
 
7
Pissarides, Christopher A., “Short-Run Equilibrium Dynamics of Unemployment, Vacancies and Real Wages,” The American
Economic Review, Volume 75, Issue 4 (Sep., 1985),676
8
Mortensen, Dale T., et. al., “Labor Market Models of Worker and Firm Heterogeneity,” October 7, 2009 Pages 2, 3 and 5
 
 8 
 

Employment and Unemployment Policy and Regulatory Analytics

The importance of policy and regulatory issues, such as the ease of hiring and firing, establishing
a business, social welfare costs, taxation, and other similar business operations questions is
addressed in the writings of the Nobel Laureates. 9 , 10 Part of the confusion in the term of
changing preferences comes from the different basic modeling of preferences in standard
economics and in some behavioral economics. As with standard analysis, going from
consideration of policy to a recommendation requires a positive evaluation of what the political
process will do with such a recommendation. 11 , 12 Important considerations affecting job
destruction include:

„ Start-up Costs 13 , 14
„ Complex Regulatory requirements 15
„ Retirement Programs. 16
„ Availability of Finance 17
„ Bankruptcy Availability. 18
„ High Unemployment Insurance. 19 , 20 , 21
„ Minimum Pay Requirements. 22
„ Employment Protection Programs 23 , 24 , 25
„ Wage Demands 26
„ Improved Productivity 27 , 28
„ Improved Technology 29
„ Monetary Policy and Inflation 30 , 31
                                                            
9
Diamond, Peter, “Behavioral Economics and Its Applications,” 2007, Princeton: Princeton University Press., Page 2
 
10
Diamond, Page 5
11
Diamond, Page 4
12
Diamond, Peter, “Behavioral Economics and Its Applications,” 2007, Princeton: Princeton University Press., Page 2
 
13
Pissarides, Christopher A., “Company Start-Up Costs and Employment,” Paper written for Festschrift Conference for Ned
Phelps, Columbia University, October 5-6, 2001., Page 1
14
Mortensen, Dale T., “Island Matching,” October 1, 2008
15
Pissarides, page 15
16
Diamond, Page 5
17
Pissarides, Page 2
18
Pissarides, Page 2
19
Mortensen, Page 191
20
Mortensen, Page 191
21
Mortensen, Page 191
22
Mortensen, Dale T., “Reducing Supply-Side Disincentives to Job Creation” Page 191
23
Mortensen, Page 192
24
Mortensen, Page 193 
25
Mortensen, Excerpted from pages 206-28=08
26
Mortensen, Page 193 
27
Mortensen, Dale T., “Reducing Supply-Side Disincentives to Job Creation” Pages 193-194
28
Mortensen, Page 35
29
Mortensen and Pissarides, Page 246
30
Phillips curve-- In economics, the Phillips curve is a historical inverse relationship between the rate of unemployment and the
rate of inflation in an economy. Stated simply, the lower the unemployment in an economy, the higher the rate of inflation. While
 9 
 

Analysis suggests that the provisions of the unemployment insurance system have important
disincentive effects on job creation. Specifically, the model implies that a 50 percent reduction in
unemployment insurance benefit levels would decrease the unemployment rate in the United
States by almost one and one-half percentage points. 32 , 33

These above factors tend to have a negative impact and thus increase job destruction potential.

On the other side of this determination, there are important opportunities whereby policy makers
can provide positive impact on the job creation functions by regulatory and support mechanisms.
Job creation subsidies explain 91 percent of the variation in unemployment rate averages over
the 1983-88 time period across the principal nineteen Organization for Economic Cooperation
and Development (OECD) industrial countries. 34

Some others job creation parameters include:

„ Training Programs 35
„ Improved Profitability 36
„ Financial Incentives 37
„ Tax Incentives 38 , 39
„ Concentrated Skilled Workforce
„ Bankruptcy Protection
„ Improved Productivity 40 , 41
„ Efficiency Gains 42
„ Improved Technology 43
„ Monetary Policy 44 , 45

It is important to note that many of these job creation and support programs have the greatest
positive impact on low skilled and low paid workers. 46
                                                                                                                                                                                                
it has been observed that there is a stable short run tradeoff between unemployment and inflation, this has not been observed in
the long run.)
31
Pissarides, Pages 10-11
32
Mortensen, Pages 210-211
33
Mortensen and Pissarides Pages 242-243 
34
Mortensen, Dale T., “Reducing Supply-Side Disincentives to Job Creation” Page 190
35
Mortensen and Pissarides, Page 27
36
Mortensen, Page 7
37
Mortensen and Pissarides, Page 20
38
Mortensen and Pissarides, Page 20
39
Mortensen and Pissarides, Page 27
40
Mortensen, Page 35
41
Mortensen, Dale T., “Reducing Supply-Side Disincentives to Job Creation” Pages 193-194
42
Mortensen, Dale T., “Reducing Supply-Side Disincentives to Job Creation” Pages 193-194
43
Mortensen, Dale T., “Reducing Supply-Side Disincentives to Job Creation” Pages 193-194
44
Pissarides, Page 3 
45
Pissarides, Pages 10-11
 10 
 

From a policy perspective, it is important to recognize that because job creation rates depend on
unemployment, which is a slow-moving variable, whereas job destruction rates do not depend on
it, that job destruction is more volatile than job creation rates. 47

Underlying these different analytical parameters is an even more important consideration for
long term planning.

It has been determined labor pooling in metropolitan areas is more critical to company relocation
and job formation than any other factor. . 48

This important finding supports the additional finding that the ability to choose the most suitable
employees and that the heterogeneity in skills attracts both firms and even more workers to
bigger markets and supports agglomeration at higher trade costs. 49 These same findings have
led to an additional finding that such results encourage and support the additional relocation of
even more skilled and experienced workers into the market and thus further strengthen and
expand this process—this is especially important when high-skilled tech labor is required. 50

Preserving Economic Mobility -- Social Welfare Policies

The primary goal of the Welfare State is to insure the population against “social risks” as a way
to increase social cohesion and equality…. How the different instruments of social policies are
conducted have relevant consequences for poverty, income distribution, and the functioning of
the labor market, as governments may also try and achieve more equitable distribution through
regulation of economic relationships, particularly those in the labor market. Social policy
instruments may be usefully classified according to their goals. More or less obvious goals of the
policies of interest here –each, of course, an intermediate target in pursuit of deeper ends -- are
the following:

A. combating social exclusion,

B. reducing overall inequality, and
C. increasing rewards from labor market participation. 51

Sickness and Health Care has the next-highest share of social protection spending
Unemployment benefits are often regarded as an important component of social expenditures….
Sickness and especially disability transfers perform a similar function as protection against non-
employment. 52

                                                                                                                                                                                                
46
Mortensen and Pissarides, Page 20
47
Pissarides, Page 13
48
Pissarides, Page 3
49
Pissarides, Page 1
50
Pissarides, Page 3
51
Pissarides, Pages 6-7
52
Pissarides, Page 10
 11 
 

A primary intermediate goal of social policy is the first one listed in our classification above,
namely that of guaranteeing subsistence to people in need, regardless of their current and past
employment. 53

A third notionally distinct (but in practice intimately related) aim of European social policies is
that of improving the lot of workers, chiefly by protecting them from adverse labor-market or
lifecycle developments. 54

A different question arises in the consideration of retirement and/or disability plans and how or if
this should be undertaken.

Viewed in the settings of a century or two, economically advanced countries have experienced
two striking changes – large increased in average life expectancy and large decreases in the
average age at which (long-career) workers stop working (or stop holding full time jobs. This
trend has been accompanied by a drop in the length of the average working year as well. Trend
growth in real earnings plays a central role in these phenomena. Higher earnings and tax-
financed higher public expenditures contribute to longer lives by providing a higher standard of
living and by financing improvements in public health and in medical knowledge and its
application. Higher earnings support decreased work, on both annual and lifetime time scales,
by allowing higher consumption despite decreased work. 55

It is a mistaken policy to have very high implicit taxes that strongly encourage early retirement
(and which may affect the pension system long term) as a response to unemployment which Is
generally shorter term and not systematically improved long-term. 56

Mandatory pension systems are mandatory because of a concern that left to their own devices too
many workers would not save adequately for retirement. 57

Insofar as the mandatory pension system reduces replacement rates as part of adapting to longer
lives, workers are likely to need additional voluntary savings if they are to have adequate
replacement rates. Both employers and government can play a major role in assisting and
encouraging workers to save for retirement. 58

Recently, there has been an explosion of analyses of how workers respond to employer-provided
retirement savings opportunities. Much has been learned about how poorly many workers do in
selecting a savings rate and in selecting an asset portfolio. Moreover, much has been learned,
drawing on behavioral economics on how to induce workers to do better. 59
                                                            
53
Pissarides, page 13
54
Pissarides, Page 22
55
Diamond, Peter, Pensions for an Aging Population,” Presented at IDEI Annual Conference, Toulouse, France, Nov. 2, 2005.
Pages 1 and 2
56
Diamond, Page 7
57
Diamond, Page 13
58
Diamond, Page 16
59
Diamond, Page 17
 12 
 

Economic theory suggests a number of conclusions about pensions.

Pension systems have multiple objectives

Analysis should consider the pension system as a whole
Analysis should be framed in a second-best context 60

Messages for policy makers

Core arguments
• The roots of the problems of pension finance are long-run trends, not a short run “crisis”.
• Pension systems have multiple purposes, diverse institutions, diverse histories, diverse politics
and diverse constraints.
• Thus there is no single best system. Pension systems differ widely. This is as it should be.
• Options widen as capacity constraints relax. But, as discussed in Box 3, even in the most
advanced economies there are benefits from keeping choices simple.
• Advice about pension reform needs understanding of the underlying principles. There is room
for disagreement about choice between sensible strategies; there is wide agreement on some
aspects of what makes bad policies.
• Examples of bad policies include staying too long with an unsustainable system; prematurely
adopting a system that exceeds implementation capacity (Barr and Diamond 2008, Chapters 14
and 15, argue that the introduction of mandatory funded individual accounts in China in 1998 is
an example); and incorporating excessive implicit taxes — many countries have systems where
benefits rise insufficiently in response to later retirement. 61

Government – Public Sector – Private Employment General Considerations (MENA

Country Analysis)

The concern in the present context is whether the allocation of skilled labor is the one most likely
to maximize the country’s growth potential. ….Manufacturing occupies a smaller fraction of the
labor force than in other industrializing countries, and this is compensated for in the MENA
region by a bigger public sector …government and public sector (excluding health and education
in the case of Table 5b) employ a bigger fraction of the non-agricultural labor force than in any
region outside Africa. 62

Another set of more detailed statistics shows that in Egypt, government employs more than half
of all degree holders in the country, with public enterprises also employing a large fraction.
Public sector employment of this magnitude clearly interferes with the static efficiency of the
labor market and deeper country studies need to investigate carefully the uses to which the public
sector puts this human capital. Page 9

Recent studies show that low productivity is exacerbated in the public sector of countries in the
MENA region by an increasing overstaffing (World Bank, 2004). In the early 1990s, the share of
underutilized workers in the public sector ranged from 17 % (Algeria) to 21 % (Egypt) and to
even more in the oil exporting countries. This share, despite its substantial size, has increased
                                                            
60
Diamond, Page 6
61
Diamond, Pages 26-27
62
Pissarides Page 8 
 13 
 

recently to 35 % in Egypt and 40 % in Jordan. Berthelemy et al. (1999) estimated the average
loss of GDP growth due to public sector employment by making the admittedly strong
assumption that the fraction of human capital employed in the administrative public sector does
not contribute at all to growth. The loss in the MENA and sub-Saharan Africa regions is bigger
than elsewhere by a large margin. 63

The waste of human capital through the high unemployment rates must be a contributory factor
to the low overall contribution of human capital to growth. Interestingly, despite the high
unemployment rates, entrepreneurs regularly cite the lack of labor with suitable skills as an
important constraint to hiring. The combination of high skilled unemployment and skill
shortages at the industrial level provides support to those who have claimed that the education
systems in the MENA region have mostly been geared to the needs of the public sector. The high
wages and other job advantages (such as job security, worker protection and social allowances)
offered by the public sector lead to educated workers queuing for public sectors jobs, and so to
the absence of pressure to reform the educational system according to the needs of industry. 64

Human Capital

A variety of ‘engines of growth’ are usually discussed in the growth literatures that are directly
or indirectly related to human capital and the implementation of new ideas. The conclusion
reached from a reading of the recent growth literature is that if we are to understand growth and
development, we need to understand the creation and deployment of human capital. 65

Research on growth and the labor market in the MENA region has to begin with an examination
of the labor market institutions in the MENA countries that are likely to influence growth
outcomes….There is virtually no literature explaining which labor market institutions are likely
to be good for growth and which bad…In the case of the MENA region, although some recent
studies analyze quite extensively the functioning of the labor market, there is very little
discussion in the connections between the labor market and growth. 66

Country research on growth can make a real contribution to our understanding of growth if it can
produce new data that can identify labor-market institutions that are conducive to the creation
and deployment of good quality human capital and institutions that are wasteful of human
resources…. It is shown that despite rapid growth in human capital resources, it is unlikely that
human capital has contributed significantly to growth in this region. The challenge facing
research in this region is to find the reasons for the apparent wasteful use of human capital. 67

                                                            
63
Pissarides Pages 9-10
64
Pissarides Page 10
65
Pissarides, Christopher A., et. al., “Labor markets and economic growth in the MENA region,” Growth Development Project
of the World Bank, 1999 since revised) Page 2
66
Pissarides Page 2
67
Pissarides Page 2
 14 
 

Conclusion

The simplified statement of theory noted at the beginning of this report clearly is inadequate to
define and differentiate the importance of establishing and embedding analytic parameters across
broad societal structures.

The questions which need to be created and developed to bring together the appropriate system
of analysis are of critical concern. Doing this right will allow for advanced statistical techniques
such as regression analysis, discrete choice modeling, and mathematical optimization to occur.
These abilities will provide tools to develop animated maps and charts to stimulate critical
changes across the entire economy.

Turbulence in the economy is to be avoided if at all possible. The new ability arising from the
establishment of policies, regulations, and implementable programs to collect and analyze and
achieve the critical actionable insights can lead to creating dash boards, score cards, simulation
and scenario development, and more tools to provide strong visual support for comprehension
and action—data visualization and process stimulation tools can bring data to life!

An even more detailed report has been prepared and is available for submission if requested.

The following bibliography contains the reference materials reviewed in preparation of this
report. These complex writings in economic theory by the 2010 Laureates for Economic Science
contain detailed analysis and theorem solving algebraic expressions of economic analysis with
resulting expressions for establishing methodologies for policy development with strong analytic
support.
 15 
 

Bibliography

Cole, Harold L., “Can the Mortensen-Pissarides matching Model Match the Business Cycle Facts?,”
Federal Reserve Bank of Minneapolis, Research Department Staff Report 224, December
1996. http://www.minneapolisfed.org/research/sr/SR224.pdf

Diamond, P. and Mirrlees, J.”Adjusting One’s Standard of Living: Two-Period Models,” March 29,
2001. http://econ-www.mit.edu/files/668
 
Diamond, Peter. A., “Aggregate Demand Management in Search Equilibrium,” The Journal of Political
Economy, Vol. 90, Issue 5, (Oct. 1982), 881-
894. http://econ.blog.us/Teaching_Folder/Econ_202b/readberk/Diamond.pdf

Diamond, Peter, “Behavioral Economics and Its Applications,” 2007,Princeton: Princeton University
Press. http://personal.inet.fi/tiede/yjs-hv/BE_Intro+TOC.pdf
 
Diamond, Peter A., “Discussion of Orzag-Stiglitz paper for World Bank conference: New Ideas about Old
Age Security—The transparency myth.”
 
Diamond, Peter A. and Stiglitz, J., “Increases in Risk and in Risk Aversion,” Cowles Foundation Paper
414, Vol. 8, No. 3, July 1974. http://econ-www.mit.edu/files/611

Diamond, Peter A., “The Evaluation of Infinite Utility Streams,” Econometrica, Vol. 33, No. 1, Jan. 1965)
170-177.
http://folk.uio.no/gasheim/zDia1965.pdf

Diamond, P.A., “National Debt in a Neoclassical Growth Model,” The American Economic Review, Vol.
55, No. 5, (Dec. 1965), 1126-1150. http://www.ssc.wisc.edu/~manuelli/712/NationalDebtDiamond.pdf 
 
Diamond, Peter A., “Nobel Prize Lecture,” December 8, 
2010, http://nobelprize.org/mediaplayer/index.php?id=1428  
 
Diamond, Peter A., “Nobel Prize Lecture Slides,” December 8, 
2010, http://static.nobelprize.org/nobel_prizes/economics/laureates/2010/diamond‐lecture‐slides.pdf 

Diamond, Peter, “Pensions for an Aging Population,” Presented at IDEI Annual Conference, Toulouse,
France, Nov. 2, 2005. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=868540## (one click to
download)
 
Diamond, Peter A., “Proposals to Restructure Social Security,” The Journal of Economic Perspectives,
Vol. 10, No. 3 (summer, 1996), pp. 67-
88. http://econpapers.repec.org/article/aeajecper/v_3a10_3ay_3a1996_3ai_3a3_3ap_3a67-88.htm (one
click to download)
 
Diamond, Peter. And Barr, Nicolas, “Reforming pensions: Principles, analytical errors and policy
directions,” London School of Economics, MIT Department of Economics, International Social Security
Review, Vol. 62, Feb. 2009, Blackwell Publishing Ltd., Oxford, UK, 2009. http://econ-
www.mit.edu/files/4025
 16 
 

Diamond, Peter A., “Risk Sharing and the Welfare State,” talk presented at the Toulouse Roundtables on
Economic Policy at the Conference in Tribute to Jean-jacques Laffont, July 1, 2005. http://econ-
www.mit.edu/files/692

Diamond, Peter A., et. al., “Social Security Reform in China: Issues and Options,” January 2005. China
Economic Research and Advisory Programme http://econ-www.mit.edu/files/691

Diamond, Peter, “Social Security Rules that Vary with Age,” Paper prepared for 2003 CeRP Confernce,
“Is Mandatory Retirement an Outdated Feature of Pension Systems?” September 2003, Real Carlo
Alberto, Turin, Italy http://econ-www.mit.edu/files/686
 
Diamond, Peter, “Wage Determination and Efficiency in Search Equilibrium,” Review of Economic
Studies, (1982) XLIX, 217-227, The Society for Economic Analysis
1982. http://webcache.googleusercontent.com/search?q=cache:http://nb.vse.cz/~BARTONP/mae911/dia
mond.pdf

“An Interview with Peter Diamond,” MD Interview, G. Moscarini and R. Wright, July 12, 2006,
Macroeconomic Dynamics, II, 2007, Cambridge University Press, Printed in the United States of America,
Pages 543-564. http://econ-www.mit.edu/files/1573

Mortensen, Dale T.et al., “An Empirical Model of Growth Through Product Innovation,”
Econometrica, Vol. 76, No. 6 (November, 2008), 1317–
1373 http://www.ssc.wisc.edu/~rlentz/ressources/ECTA5997.pdf
 
Mortensen, Dale T., “Island Matching” Northwestern University, October 1,
2008 http://economics.uchicago.edu/lucas_conference/papers/islandmatch2.pdf

Mortensen, Dale T., and Pissarides, Christopher A., “Job Creation and Job Destruction in the Theory of
Unemployment,” Review of Economic Studies, (1994) Pages 397-
415. http://individual.utoronto.ca/zheli/D12.pdf

Mortensen, Dale T., ”Job Search and Labor Market Analysis,” Discussion Paper No. 594
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Mortensen, Dale T., et. al., “Labor Market Models of Worker and Firm Heterogeneity,” Northwestern
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2010, http://nobelprize.org/mediaplayer/index.php?id=1430 (Video)

Mortensen, Dale T., “Markets with Search Frictions,” Slides used in Nobel Prize Lecture
2010, http://images.nobelprize.org/nobel_prizes/economics/laureates/2010/mortensen-lecture-slides.pdf

Mortensen, Dale T., “More on Unemployment and Vacancy Fluctuations,” Review of Economic
Dynamics 10 (2007) 327–
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nsen_More-on-unemployment-and-vacancy-fluctuations_2007.pdf
 17 
 

Mortensen, Dale T., et. al., “On-the-Job Search and the Wage Distribution” Journal of Labor Economics,
2005, vol. 23, no. 1, 2005 by The University of
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Mortensen, Dale T. et. al., “Productivity Growth and Worker Reallocation,” INTERNATIONAL
ECONOMIC REVIEW August 2005 Vol. 46, No.
3 http://www.econ.ku.dk/CAM/Files/workingpapers/2004/2004-12_Lentz%20and%20Mortensen.pdf

Mortensen, Dale T., and Pissarides, Christopher A., “Taxes, Subsidies and Equilibrium Labor Market
Outcomes,” Nov. 1997 http://econ.lse.ac.uk/staff/cap/Taxes_Subsidies.pdf

Mortensen, Dale T., “Reducing Supply-Side Disincentives to Job

Creation” http://www.kansascityfed.org/Publicat/Sympos/1994/s94morte.pdf

Mortensen, Dale T. and Pissarides, Christopher A., “Unemployment Responses to ‘Skill-Biased’

Technology Shocks: The Role of Labour Market Policy,” The Economic Journal, 109 (April) 1999, Pages
242-265. http://onlinelibrary.wiley.com/doi/10.1111/1468-0297.00431/pdf

Mortensen, Dale T., “Wage Dispersion in the Search and Matching Model with Intra-Firm Bargaining,”
Northwestern University and Aarhus University, September 30, 2009 http://4270638906799796108-a-
1802744773732722657-s-sites.googlegroups.com/site/dalemortensensite/home/working-papers/match-
dispersion.pdf?attachauth=ANoY7cq0Sl8wUjTxEDAyzoexyMbgDhroO-9T5fPaUZCyaKsZ6O_nCry5-
fiip_wcIJ43WF005rZKRva-zlhCmasUP3Rb7JEEM3cBX513PibBcHQ5aotuUaHGxQlbKHn3W-
hgHCSpuvpaTMSLgb_Aav5cUNa0IW1A0pPKp9fWCs-2cj2McX4h17sfBtEVAYybaBI0sS_fR7V-
lr8epyfuK-I36UNm_gTioZpBgaQiWou7Ji4TmNlI_zZcTzFt_BQKefod7qVXIvcy&attredirects=0

Mortensen, Dale T., “Wage Dispersion: Why are Similar Workers Paid Differently?” Industrial & Labor
Relations Review, Volume 58, Issue 4 2005 Article
86 http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1170&context=ilrreview

Pissarides, Christopher A, “ Company Start-Up Costs and Employment,” Paper written for Festschrift
Conference for Ned Phelps, Columbia University, October 5-6,
2001. http://www.elsevier.com/framework_aboutus/pdfs/Economics_Nobel_2010/Pissarides_Nobel/Fons
eca_Entrepreneurship-start-up-costs-and-employment_2001.pdf

Pissarides, Christopher A., “Equilibrium in the Labour Market with Search Frictions,” Nobel Lecture,
Dec. 8, 2010, (Presentation
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Pissarides, Christopher A., et. al., “Labor markets and economic growth in the MENA region,” Growth
Development Project of the World Bank, 1999 since
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Pissarides, Christopher A., 2010 Prize Lecture by Christopher A. Pissarides, Dec. 8, 
2010, http://nobelprize.org/mediaplayer/index.php?id=1432 (Video)  
Pissarides, Christopher A “Trade and Industrial Location with Heterogeneous Labor ,” The Economic
Geography of Europe: Measurement, Testing and Policy Simulations, Villars, 18/19 January
2002. http://www.elsevier.com/framework_aboutus/pdfs/Economics_Nobel_2010/Pissarides_Nobel/Amit
i_Trade-and-industrial-location-with-heterogeneous-labor_2005.pdf
 
 18 
 

Pissarides, Christopher A, “The Economics of Search,” Forthcoming in Encyclopedia of the Social and
Behavioral Sciences, Elsevier. September 2000
 
Pissarides, Christopher A, “Scale Effects in Markets with Search,” Oct.
2002. ftp://repec.iza.org/RePEc/Discussionpaper/dp691.pdf

Pissarides, Christopher A,” Short-Run Equilibrium Dynamics of Unemployment, Vacancies, and Real
Wages,”
The American Economic Review, Volume 75, Issue 4 (Sep., 1985),676-
690. http://qed.econ.queensu.ca/pub/faculty/lloyd-ellis/econ815/papers/pissarides.pdf

Pissarides, Christopher A, “Unemployment Dynamics with International Capital Mobility,” May

2000. http://personal.lse.ac.uk/pissarid/papers/AP04.pdf

Pissarides, Christopher A., “Unemployment in Britain: A European Success Story,” Written for the
conference “Unemployment in Europe: Reasons and Remedies, Oct
2003. http://cep.lse.ac.uk/pubs/download/dp0600.pdf

Pissarides, Christopher A, “Welfare Systems and Labor Markets in Europe: What convergence before and
after EMU?” http://www.personalweb.unito.it/giuseppe.bertola/EcoPolLav/WelfPolEU.pdf
 
Pissarides, Christopher A., and Mortensen, Dale T., “New Developments in Models of Search in the
Labor Market,” Center for Labor Market Research, Science Park, Denmark, Nov.
1998. http://cenet3.nsd.edu.cn/uploadimages/2004487512622286.pdf  
 
Nobel Prize, http://nobelprize.org/nobel_prizes/economics/laureates/2010/press.html, October 11, 2010