Question

Sectoral shifts, frictional unemployment, and job searches Suppose the world price of aluminum falis significantly. The demand for labor among aluminum-producing firms in Pittsburgh __________ will demand for labor among airplane manufacturing firms in Washington, which use aluminum as an input, will ________ unemployment that results from sectoral shifts such as the ones describes above is best categorized as ___________ unemployment. Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply,

A. Taxing the price of placing a resume or posting a job opening on a job-search website.
B. Establishing govemment-run employment agencles to connect unemployed workers to job vacancles
C. Improving a widely used job-search website so that it matches workers to job vacancies more effectively

Answer 1

The drop in world aluminum prices leads to an increase in structural unemployment in Pittsburgh, which can be alleviated by establishing employment agencies and improving job matching on job-search websites, not by taxing job search activities.

Step-by-step explanation:

When examining types of unemployment in different scenarios, we categorize them into cyclical, frictional, or structural. In the case of sectoral shifts like the world price of aluminum falling, the demand for labor among aluminum-producing firms in Pittsburgh would decrease, while demand for labor among airplane manufacturing firms in Washington would increase. The unemployment that results from such sectoral shifts is best categorized as structural unemployment.

To reduce structural unemployment, policies that do not include taxing job search activities but rather improve job search efficiency and assistance would be helpful. Therefore, establishing government-run employment agencies (Option B) and improving a job-search website to match workers with job vacancies more effectively (Option C) would help achieve this goal.

Frictional unemployment is different from structural unemployment. It occurs as a natural part of the job search process when workers move between jobs or enter the labor market. The level of frictional unemployment will depend on the ease of learning about job opportunities and the willingness to move to new areas for work.