The Causes and Consequences of Long-Term Unemployment in Europe

One of the most striking features of European labour markets is the high incidence of long-term unemployment. In this paper we review the literature on its causes and consequences. Our main conclusions are that: the rise in the incidence of long-term unemployment has been 'caused' by a collapse of outflow rates at all durations of unemployment while the long-term unemployed do leave unemployment at a slower rate than the short-term unemployed, this has always been the case and their relative outflow rate has not fallen over time there is no evidence that, for a given level of unemployment, the incidence of long-term unemployment has been ratcheting up over time once one controls for heterogeneity of the unemployed, there is little evidence of outflow rates that decline over a spell of unemployment While these findings suggest that long-term unemployment is not a problem independent of unemployment itself, one should recognise that the experience of long-term unemployment is a horrid one for those unfortunate enough to experience it.