Two Americans, British-Cypriot share economics Nobel

STOCKHOLM - The Nobel prize for economics was awarded Monday to U.S. researchers Peter A. Diamond and Dale T. Mortensen, and British-Cypriot citizen Christopher A. Pissarides, the Royal Swedish Academy of Sciences announced.

The trio were awarded the prize for their "analysis of markets with search frictions," in relation to the labour market.

They are to share the award, worth 10 million kronor ($1.5 million) equally.

The prize - formally called The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel - was last year awarded to U.S. researchers Elinor Ostrom and Oliver Williamson for their work in the field of economic governance.

Ms. Ostrom was the first woman to win the economics prize that was first awarded in 1969.

Excerpts from 2009 Nobel Prize economic citation:

Excerpts from the citation awarding the 2010 Nobel Memorial Prize in Economic Sciences to Americans Peter Diamond and Dale Mortensen and Christopher Pissarides, a British and Cypriot citizen.

"Why are so many people unemployed at the same time that there are a large number of job openings? How can economic policy affect unemployment? This year's Laureates have developed a theory which can be used to answer these questions. This theory is also applicable to markets other than the labor market."

"On many markets, buyers and sellers do not always make contact with one another immediately. This concerns, for example, employers who are looking for employees and workers who are trying to find jobs. Since the search process requires time and resources, it creates frictions in the market. On such search markets, the demands of some buyers will not be met, while some sellers cannot sell as much as they would wish. Simultaneously, there are both job vacancies and unemployment on the labor market."

"This year's three Laureates have formulated a theoretical framework for search markets. Peter Diamond has analyzed the foundations of search markets. Dale Mortensen and Christopher Pissarides have expanded the theory and have applied it to the labor market. The Laureates' models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy. This may refer to benefit levels in unemployment insurance or rules in regard to hiring and firing. One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times."

"Search theory has been applied to many other areas in addition to the labor market. This includes, in particular, the housing market. The number of homes for sale varies over time, as does the time it takes for a house to find a buyer and the parties to agree on the price. Search theory has also been used to study questions related to monetary theory, public economics, financial economics, regional economics, and family economics."
Photo : Prof. Bertil Holmlund (left), Permanent secretary of the Royal Academy of Sciences Staffan Normark (centre) and Prof. Per Krusell announce the Nobel Prize in Economic Sciences on Monday in Stockholm.
DPA/AP - Oct 11,2010