IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

An Endogenous Skill Loss Model of Long-Term Unemployment

Listed author(s):
  • Daron Acemoglu

This paper considers a model in which the unemployed have to incur a cost to maintain their skills. If whether they have done so is not observable, the economy has multiple equilibrium supported by self-fulfilling beliefs on the part of the employers. There is a unique steady state equilibrium associated with each of these. In the first equilibrium associated with each of these. In the first equilibrium, which we call the Skill Loss Equilibrium, the long-term unemployed do not incur the cost and lose their skills; there is duration dependence and the exit probability of the long-term unemployed is lower. It is shown that in this equilibrium unemployment and long-term unemployment are higher, and, welfare and profits are lower than the No Skill Loss Equilibrium. The inefficiency of this equilibrium is characterised as externalities and constructive government action in form of positive discrimination and labour market policies are suggested.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0061.

in new window

Date of creation: Jan 1992
Handle: RePEc:cep:cepdps:dp0061
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp0061. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.