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Hysteresis and Insider-Outside Theory - A Literature Review


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  • Michael Dobbie

    (Department of Economics, Macquarie University)


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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Bibliographic 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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Keywords: Hysteresis; persistence; insider-outsider theory;

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