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Competition between unemployed and non-participants, and unemployment hysteresis

Author

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  • Butter, Frank A.G. den

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Jongen, Egbert L.W.
  • Kock, Udo

Abstract

This paper considers labour supply and demand shocks in a simple flow model of the labour market. We explicitly model the propagation of shocks and the adjustment mechanisms. By way of simulations we explore the extent of labour market hysteresis arising from negative duration dependence and the so-called entitlement effect that arises when social security provisions become more generous. The main findings of our modelling exercise are: (i) the extent of hysteresis depends very much on the way labour demand reacts to labour supply, (ii) negative duration dependence adds to unemployment hysteresis, and, (iii) the degree of hysteresis depends on the type of the shock.

Suggested Citation

  • Butter, Frank A.G. den & Jongen, Egbert L.W. & Kock, Udo, 1999. "Competition between unemployed and non-participants, and unemployment hysteresis," Serie Research Memoranda 0013, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:1999-13
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    References listed on IDEAS

    as
    1. Kock, Udo, 1998. "Constructing labour market flows for the Netherlands using macro data from social security provisions : 1970-1995," Serie Research Memoranda 0040, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
    3. Butter, F.A.G. den, 1993. "Supply of social security as a cause of low labour participation in the Netherlands : a cliometric analysis," Serie Research Memoranda 0056, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    4. Hartog, Joop & Theeuwes, Jules, 1993. "Post-war unemployment in the Netherlands," European Journal of Political Economy, Elsevier, vol. 9(1), pages 73-112, March.
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    More about this item

    Keywords

    unemployment persistence; labour market flows;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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