The Basic Labor Market Mechanisms

1. November 2008.

This publication represents a simple handbook about the basic labor market mechanisms and the most important factors determining their effects.

Some of the topics include setting the balance between manpower offer and demand, identification of causes of unemployment and the existence of unreported employment. Special attention is payed to the effects of various economic policies on the creation of new jobs and payment levels.

All topics processed have been analyzed through the use of the classical model of offer and demand.

Basic goal is to provide the reader, in a short period of time, with the capability to master this simple but useful tool that enables analyzing effects of current and future economic policies on labor market. The greatest advantage of that kind of approach is in that that it enables the application of the same model in analyzing many other specific issues related to labor market, that have not been elaborated in this publication.

When using this model it is very important to bear in mind that it represents a simplified version of reality, based on a certain number of assumptions. Therefore, when using it in any new situation, in the beginning it is necessary to consider whether these assumptions have been fulfilled enough, and in what way certain deviations in one of them will affect the results obtained. Depending on concrete given circumstances, the initial model can be adapted in a way that it suites the real conditions more, which enables obtaining more accurate replies to questions asked.

This work is funded, in part, by a grant from the U.S Government.

It was published in November of 2008.