Peter Diamond and Dale Mortensen, both Americans, and Christopher Pissarides, a British-Cypriot, have won the 2010 Nobel Prize in economics for their theories on unemployment that help explain why many people can remain unemployed even when there is a surplus of jobs openings.
In economics jargon, the phenomenon is known as "search friction."
"In the labor market, some firms may not easily find workers to fill their job vacancies, and some unemployed workers will often have to search for extended periods of time in order to find suitable jobs," Bertil Holmlund, chairman of the Nobel Memorial Prize Committee in Economic Sciences, announced in Stockholm. "Peter Diamond, Dale Mortensen, and Christopher Pissarides have developed a theory that explains the workings of markets with search friction."
Per Krusell, a member of the committee, summarized the concept of search friction as "the time and effort that buyers and sellers have to locate each other in the market place."
"In particular, their work provides a coherent theory of unemployment, of equilibrium unemployment, and in this theory, incentives in job search and recruitments are crucial determinants of unemployment as well as other labor market phenomenon," Holmund added.
One conclusion of their research is that more generous unemployment benefits often result in higher unemployment figures and longer search times for those looking for jobs.
Their research looks at economic policy in terms of unemployment insurance and rules regarding hiring and firing, and also studies the effects of economic policy on wages.
Holmund said that their "search theory" has also been used to benefit other fields of study.
"The theory of Diamond, Mortensen, and Pissarides has become the leading workhorse in macroeconomic analysis of the labor market, in part because of its usefulness for addressing various policy issues, Holmund said, before adding that "the theory extends well beyond labor markets."
"It has been used to study issues in monetary economics, public economics, financial economics, housing economics, and family economics," Holmund said.
U.S. President Barack Obama has nominated Diamond to become a member of the Federal Reserve, but the Senate failed to approve his nomination before lawmakers left to campaign for the midterm congressional elections.
In his research, Diamond focused on analyzing the foundations of search markets while Mortensen and Pissarides expanded the theory and applied it to the labor market.
The 70-year-old Diamond is an economist at the Massachusetts Institute of Technology and an expert on the U.S. Social Security system, pensions and taxation. He was a former mentor to current U.S. Federal Reserve Chairman Ben Bernanke, who was one of his doctoral students.
Mortensen, 71, is a professor of economics at Northwestern University in Illinois, and Pissarides, 62, is a professor at the London School of Economics.
They will share the award of 10 million kronor (roughly $1.5 million) equally.
The economics prize, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, was established in 1968. It is not part of the original group of awards set out in Nobel's will.
The economics prize was awarded to Elinor Ostrom and Oliver Williamson last year for their work in the field of economic governance.
Maurice Allais, the only Frenchman to have won the economics award, died on October 9 at his home in Saint-Cloud, southwest of Paris, at the age of 99. He received the prize in 1988 for his "pioneering contributions to the theory of markets and efficient utilization of resources" and was one of the early critics of deficiencies in the global financial system.
The award in economics was the last Nobel Prize to be given out this year. The prestigious awards will be presented on December 10 in twin ceremonies in Stockholm and Oslo.
The Nobel Peace Prize was awarded on Friday to imprisoned Chinese dissident Liu Xiaobo for his long and non-violent struggle for fundamental human rights in China. The other awards were given to laureates from all over the world for work in bonding carbon atoms to create new medicines, developing the thinnest and strongest material known to man, pioneering in vitro fertilization, which helps millions of infertile couples have children, and ground-breaking writing on the troubled history and politics of Latin America.
written by Breffni O'Rourke based on agency reports