Labor Economics · intro
What moves on the Bathtub Model of Unemployment diagram
A lower job-finding rate flattens the outflow line; the natural ratenatural rateThe unemployment level set by structural forces (matching, turnover, institutions) rather than the business cycle. u* = s/(s+f) rises as the drain narrows.
Unemployment is a bathtub: layoffs pour in, hiring drains out.
Recessions barely change layoffs, they FREEZE hiring. The drain narrows.
The water level rises to a new, higher steady statesteady stateThe resting point of a growth model, where capital per worker stops changing because investment exactly covers depreciation and dilution.. Unemployment climbs mostly because exit slows, not because entry surges.
Examiners ask this as: hiring freeze finding rate, recession unemployment flows.
Other scenarios on Bathtub Model of Unemployment