The paper "Causes and Impacts of Unemployment in Developing and Developed Economies" is an outstanding example of a micro and macroeconomic literature review. Unemployment has and continues to be a major economic menace both in developing and industrialized countries. Although this economic menace is more pronounced in developing countries, unemployment is an increasingly challenging phenomenon in developed economies. Statistics indicate that unemployment in the US and most countries in Europe have gradually increased since the onset of the economic recession in the year 2007. In developing countries, unemployment has been a major economic problem for many decades and continues to increase year after another.
This paper will discuss the causes and the impacts of unemployment in developing and developed economies. In order to understand the causes of unemployment, it will be appropriate to discuss the major categories of unemployment. Economists agree that the major categories of unemployment are frictional, structural, and cyclical unemployment. Frictional unemployment occurs when people graduate from schools and are in search of a job. This is an inevitable situation that happens in developing and developed countries. Structural employment occurs when a change in the industrial, climatic, or demographic factors occurs rendering some people jobless.
The cyclical unemployment occurs due to economic recession and inflation in an economy (Sid 2012). Structural and cyclical unemployment are major aspects of the economy and will be the focus of this paper. Figure 1: The major categories of unemployment in an economy (Sid 2012). According to Turnham and Eröcal (2014), the main cause of unemployment in an economy is the inflation rate. Economists have studied the correlation between inflation and unemployment for many decades and their conclusions have invariably differed.
In 1958, Philips argued that a reduction in unemployment empowered employees to push for increased salaries. This push for increased payment resulted in increased prices of the commodities as the employers passed the cost of the labor to the consumers.
Buffie, E., 2009, Trade policy in developing countries. Cambridge: Cambridge University Press.
Philips 2005, Regional disparities in small countries. Berlin: Springer.
Baker, M, 2011, Digit Preference in CPS Unemployment Data. Economics Letters 39 (1) pp. 117- 121.
Baker, G. & Trivedi. H. 2014, Estimation of Unemployment Duration from Grouped Data: A Comparative Study. Journal of Labor Economics 3(2) pp. 153-174.
Campbell, C., & Duca, D., 2004. The Impact of Evolving Labor Practices and Demographics on Inflation and Unemployment. Manuscript, Federal Reserve Bank of Dalla 8 (5) p.89- 112.
Corak, M. & Heisz, A., 2010. Alternative Measures of the Average Duration of Unemployment. The Review of Income and Wealth 42(1) pp. 63-74.
Kaitz, H., 2014, Analyzing the length of spells of unemployment. Monthly Labor Review 93 (11) pp. 11-20.
Gregoriou, G. & Kräussl, R., 2007, Venture capital in Europe. Oxford: Butterworth-Heinemann.
Klaveren, M., & Tijdens, K., 2012, Empowering women in work in developing countries.
Houndmills, Basingstoke: Palgrave Macmillan.
Strobl, E., & Byrne, D., 2002, Defining unemployment in developing countries: Evidence from Trinidad and Tobago. Bonn: IZA.
Sid, H. 2012, erUnemployment Duration and Incidence. American Economic Review 75 (3) pp. 461-472.
Solow, R., 2011, Comment on George L. Perry. Changing Labor Markets and Inflation. Brookings Papers on Economic Activity 2 (3) pp. 411-448.
Valletta, R., 2014, Changes in the Structure and Duration of U.S. Unemployment. Federal Reserve Bank of San Francisco Economic Review 3 (7) pp. 29-40.
Valletta, R., 2011, Declining Job Security. Journal of Labor Economics 17(4) pp. 170-197.
Turnham, D., & Eröcal, D. 2014, Unemployment in developing countries: New light on an old problem. Paris: OECS.