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Hysteresis and Insider-Outside Theory - A Literature Review

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Author Info
Michael Dobbie () (Department of Economics, Macquarie University)
Abstract

In recent years a large theoretical and empirical literature has emerged on hysteresis in unemployment. This paper reviews the theoretical part of this literature, including the various insider-outsider models that have been advanced to explain hysteresis. The review finds that while the assumptions required to generate full hysteresis are somewhat extreme, a less severe form of hysteresis, called persistence, emerges quite readily from models with reasonable assumptions. The paper however questions the extent to which the recent experience of unemployment can be explained by this approach.

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File URL: http://www.econ.mq.edu.au/research/2004/theoryreview.pdf
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Publisher Info
Paper provided by Macquarie University, Department of Economics in its series Research Papers with number 0408.

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Length: 30 pages.
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:mac:wpaper:0408

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Postal: Sydney NSW 2109
Web page: http://www.econ.mq.edu.au/
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Related research
Keywords: Hysteresis; persistence; insider-outsider theory;

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies

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