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Seniority Rules and the Persistence of Unemployment

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  • Drazen, Allan
  • Gottfries, Nils

Abstract

The authors formulate a stochastic infinite-horizon insider-outsider model that is solved explicitly and used to investigate the consequences of alternative 'seniority' rules for wage and employment determination. The model is simple enough to allow analysis of several different institutional setups. Persistence (but not hysteresis) arises when employment affects the layoff and hiring priority of workers and their relative influence on union decisions. Persistence can arise both when layoffs are random and when there is a strict layoff order. Expected employment depends not only on employment in the previous period but on a longer history of shocks. Copyright 1994 by Royal Economic Society.

Suggested Citation

  • Drazen, Allan & Gottfries, Nils, 1994. "Seniority Rules and the Persistence of Unemployment," Oxford Economic Papers, Oxford University Press, vol. 46(2), pages 228-244, April.
  • Handle: RePEc:oup:oxecpp:v:46:y:1994:i:2:p:228-44
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    Cited by:

    1. Mattias K. Polborn & Mike Hoy & Asha Sadanand, 1999. "Information and Dynamic Adjustment in Life Insurance Markets," UWO Department of Economics Working Papers 9911, University of Western Ontario, Department of Economics.
    2. De Paola, Maria & Scoppa, Vincenzo, 2003. "Family ties and training provision in an insider-outsider framework," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(2), pages 197-217, May.
    3. Eriksson, Stefan & Gottfries, Nils, 2005. "Ranking of job applicants, on-the-job search, and persistent unemployment," Labour Economics, Elsevier, vol. 12(3), pages 407-428, June.
    4. repec:eee:labchp:v:3:y:1999:i:pc:p:2985-3028 is not listed on IDEAS
    5. De Paola, Maria & Scoppa, Vincenzo, 2005. "The Role of Family Ties in the Labour Market. An Interpretation Based on Efficiency Wage Theory," MPRA Paper 8956, University Library of Munich, Germany.
    6. Lee, Darin & Singer, Ethan, 2014. "What's your number? Interpreting the “fair and equitable” standard in seniority integration for airlines and other industries," Economics of Transportation, Elsevier, vol. 3(1), pages 2-15.

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