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Unemployment Persistence


  • Arulampalam, Wiji
  • Booth, Alison L
  • Taylor, Mark P


We estimate dynamic panel data models of unemployment incidence for men using the British Household Panel Survey. Econometric issues concerning unobserved individual heterogeneity, genuine state dependence, and the initial conditions problems are addressed in detail. We find strong evidence of state dependence consistent with the scarring theory of unemployment--an individual's previous unemployment experience has implications for his future labour market experience. This suggests that policies reducing short run employment incidence will have longer-run effects by reducing the equilibrium or natural rate of unemployment. Copyright 2000 by Oxford University Press.

Suggested Citation

  • Arulampalam, Wiji & Booth, Alison L & Taylor, Mark P, 2000. "Unemployment Persistence," Oxford Economic Papers, Oxford University Press, vol. 52(1), pages 24-50, January.
  • Handle: RePEc:oup:oxecpp:v:52:y:2000:i:1:p:24-50

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    References listed on IDEAS

    1. Carlstrom, Charles T. & Fuerst, Timothy S. & Ghironi, Fabio, 2006. "Does it matter (for equilibrium determinacy) what price index the central bank targets?," Journal of Economic Theory, Elsevier, vol. 128(1), pages 214-231, May.
    2. Nicoletta Batini & Paul Levine & Joseph Pearlman, 2003. "Indeterminacy with inflation-forecast-cased rules in a two-bloc model," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
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    9. Huang, Kevin X.D. & Meng, Qinglai & Xue, Jianpo, 2009. "Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 409-430, February.
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    15. Dupor, Bill, 2001. "Investment and Interest Rate Policy," Journal of Economic Theory, Elsevier, vol. 98(1), pages 85-113, May.
    16. Stephen McKnight, 2007. "Investment and Interest Rate Policy in the Open Economy," Economic Analysis Research Group Working Papers earg-wp2007-11, Henley Business School, Reading University.
    17. De Fiore, Fiorella & Liu, Zheng, 2005. "Does trade openness matter for aggregate instability?," Journal of Economic Dynamics and Control, Elsevier, vol. 29(7), pages 1165-1192, July.
    18. William Kerr & Robert G. King, 1996. "Limits on interest rate rules in the IS model," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 47-75.
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