Nobel laureate says economic model adopted world over

11th October 2010, Comments 0 comments

Economist Christopher Pissarides said Monday that the model on unemployment that he developed with his two fellow Nobel laureates had been taken up around the world.

"Most economists in government use our models to study unemployment and the impact a policy will have on unemployment," the British-Cypriot told AFP from the London School of Economics (LSE), where he has spent his whole career.

Just hours after winning the Nobel economics prize with Peter Diamond and Dale Mortensen of the United States, he explained that policymakers now view unemployment in a "very different" way from that of 20 or 30 years ago.

"Although unemployment brings a lot of (personal) dissatisfaction, it's also an economic problem which we have to look at a little more objectively and see how it interacts with the rest of the economy," he said.

The Scandanavian governments had "gone furthest" in using the trio's model, he said, "because they intervened a lot more in labour markets to deal with the unemployment problem. That's why they have low unemployment."

Britain had also taken on some of its suggestions on what governments can do to tackle joblessness, including the former Labour government's introduction of the New Deal to provide training and work projects for jobless young people.

However, Pissarides was doubtful about the current policies being pursued in London, saying Prime Minister David Cameron's coalition was "probably" going too fast in cutting spending to pay off a massive budget deficit.

"It could be more gradualist," Pissarides told AFP.

He added: "It's a good thing not to allow the budget deficit to get out of hand. The question is whether you should do it immediately or gradually.

"If you do it immediately you might make a lot of people unemployed suddenly, and if you cut welfare support at the same time, they might fall into poverty, and then it would be more difficult to get them back in (to work)."

Several of Pissarides' colleagues and students turned out to cheer him when he appeared at the LSE, testament to the four decades he has spent at the prestigious university.

"For someone who has been a member of the LSE for 38 years -- he's been a one-club man -- we are particularly thrilled," said LSE director Howard Davies.

© 2010 AFP

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