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Patterns of Unemployment: An Insider-Outsider Analysis

Author

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  • Lindbeck, Assar
  • Snower, Dennis J.

Abstract

The paper presents a stochastic insider-outsider model that accounts for the following stylized facts: (1) unemployment rates display a high degree of serial correlation, or `persistence'; (2) the average rate of unemployment has been higher in the United States than in Europe over the 1950s and 1960s, but the opposite has been the case in the 1980s; and (3) the long-run unemployment rate is independent of the level of productivity and the magnitude of the labour force. The model also generates other empirically testable hypotheses, concerning cyclical variations in unemployment persistence, the influence of firing costs and the `discouraged worker' effect on unemployment persistence, and the effect of barriers to the entry of firms on the long-run unemployment rate.

Suggested Citation

  • Lindbeck, Assar & Snower, Dennis J., 1994. "Patterns of Unemployment: An Insider-Outsider Analysis," CEPR Discussion Papers 960, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:960
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    Citations

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    Cited by:

    1. Mike Campbell, 2000. "Reconnecting the Long Term Unemployed to Labour Market Opportunity: The Case for a 'Local Active Labour Market Policy'," Regional Studies, Taylor & Francis Journals, vol. 34(7), pages 655-668, October.
    2. International Monetary Fund, 2005. "Sweden: Selected Issues," IMF Staff Country Reports 2005/344, International Monetary Fund.
    3. Karlson, Nils, 2012. "The Limits of Pragmatism in Institutional Change," Ratio Working Papers 194, The Ratio Institute.
    4. Fischer, Peter A. & Holm, Einar & Malmberg, Gunnar & Straubhaar, Thomas, 2000. "Why do people stay? Insider advantages and immobility," HWWA Discussion Papers 112, Hamburg Institute of International Economics (HWWA).
    5. Peijie Wang, 2003. "Cycles and Common Cycles in Property and Related Sectors," International Real Estate Review, Global Social Science Institute, vol. 6(1), pages 22-42.
    6. Muysken, Joan & Zwick, Thomas, 2000. "Wage divergence and unemployment: the impact of insider power and training costs," ZEW Discussion Papers 00-37, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

    Insiders; Labour Force; Outsiders; Persistence; Productivity; Unemployment;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • 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
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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