SOCIAL-PSYCHOLOGY, UNEMPLOYMENT EXPOSURE AND EQUILIBRIUM UNEMPLOYMENT

Statistical evidence provided by social psychologists suggests an association between unemployment and social psychological well-being. They believe unemployment exposure leaves an individual with a sense of 'helplessness' that impairs motivation, hampers learning and generates adverse emotional consequences all of which are expected to reduce personal productivity. If a substantial number of people experience spells of unemployment these individually based productivity and attachment affects are likely to manifest themselves in observable impacts upon aggregate labor supply and demand. in this paper, the labor market is respecified to account explicitly for social psychological influences. Then the impact of an exogenous contractionary shock is explored within the context of this model.