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= Mismatch in U.S. Labor Markets (20 points). The financial crisis, and the deep recession that followed, caused unemployment rates in the United States to

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Mismatch in U.S. Labor Markets (20 points). The financial crisis, and the deep recession that followed, caused unemployment rates in the United States to reach almost 10 percent, nearly double the average unemployment rate from 2000-2007. Economists and pundits are worried that part of the problem is structural: either the unemployed do not have the skills that employers need or they cannot move to locations where jobs are available. In answering the following questions, consider our simple model of unemployment dynamics U+1 U= s(l- u,) au,, where s is the constant separation rate, a is the constant accession rate, and u, is the unemployment rate at time t. What would you change in the model to reflect an increasing mismatch of skills? On the next page, explain why in a few sentences. (10 points)

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