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Economics Nobel-2010

Two Americans and a British-Cypriot economist won the 2010 Nobel economics prize for developing a theory that helps explain why many people can remain unemployed despite a large number of job vacancies. The trio's model helps explain why unemployment persists and proves stubbornly resistant even when economic circumstances improve. Peter Diamond, Dale Mortensen of US and Christopher Pissarides were honoured with the 10 million Swedish Kronor prize. Diamond analyzed the foundation of so-called search markets, while Mortensen and Pissarides expanded the theory and applied it to the labour market.

According to traditional theory, labour markets should work on their own, with job seekers finding available jobs, thus creating balance. The three laureates however help show with their model-DMP model-that markets do not always work in this way. In this theory, incentives in job search and recruitment are crucial determinants of unemployment as well as other labour market phenomena. The three winners have had a big impact on how policymakers view benefits for the unemployed and what can best be done to get them back into jobs.

The awards are always handed out on December 10, the anniversary of Nobel's death in 1896.


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