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Staying on the Dole

  • Holger Strulik

    (University of Hannover)

  • Jean-Robert Tyran

    (Department of Economics, University of Copenhagen)

  • Paolo Vanini

    (University of Zurich)

We develop a simple model of short- and long-term unemployment to study how labor market institutions interact with labor market conditions and personal characteristics of the unemployed. We analyze how the decision to exit unemployment and to mitigate human capital degradation by retraining depends on education, skill degradation, age, labor market tightness, taxes, unemployment insurance benefits and welfare assistance. We extend our analysis by allowing for time-inconsistent choices and demonstrate the possibility of an unemployment trap.

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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 06-18.

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Length: 22 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:kud:kuiedp:0618
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  1. Saint-Paul, Gilles, 1995. "The High Unemployment Trap," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 527-50, May.
  2. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
  3. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
  4. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
  5. Michèle Belot & Jan C. van Ours, 2004. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 621-642, October.
  6. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  7. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  8. Nickell, Stephen, 1979. "Education and Lifetime Patterns of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S117-31, October.
  9. Machin, Stephen & Manning, Alan, 1999. "The causes and consequences of longterm unemployment in Europe," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 47, pages 3085-3139 Elsevier.
  10. Belot, M.V.K. & van Ours, J.C., 2001. "Unemployment and Labor Market Institutions : An Empirical Analysis," Discussion Paper 2001-50, Tilburg University, Center for Economic Research.
  11. Stefano DellaVigna & M. Daniele Paserman, 2004. "Job Search and Impatience," NBER Working Papers 10837, National Bureau of Economic Research, Inc.
  12. Coles, Melvyn & Masters, Adrian, 2000. "Retraining and long-term unemployment in a model of unlearning by not doing," European Economic Review, Elsevier, vol. 44(9), pages 1801-1822, October.
  13. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  14. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," SSE/EFI Working Paper Series in Economics and Finance 178, Stockholm School of Economics.
  15. Belot, M.V.K. & van Ours, J.C., 2001. "Unemployment and labor market institutions : An empirical analysis," Other publications TiSEM 29a3de46-e7bc-4b3d-abe5-b, Tilburg University, School of Economics and Management.
  16. William A. Darity & Arthur H. Goldsmith, 1996. "Social Psychology, Unemployment and Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 121-140, Winter.
  17. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  18. repec:ces:ifosdt:v::y:2002:i::p:03-52 is not listed on IDEAS
  19. Pissarides, Christopher A, 1992. "Loss of Skill during Unemployment and the Persistence of Employment Shocks," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1371-91, November.
  20. Roed, Knut, 1997. " Hysteresis in Unemployment," Journal of Economic Surveys, Wiley Blackwell, vol. 11(4), pages 389-418, December.
  21. Acemoglu, Daron, 1995. "Public Policy in a Model of Long-Term Unemployment," Economica, London School of Economics and Political Science, vol. 62(246), pages 161-78, May.
  22. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
  23. Assar Lindbeck & Sten Nyberg & Jšrgen W. Weibull, 1999. "Social Norms And Economic Incentives In The Welfare State," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 1-35, February.
  24. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
  25. Topel, Robert, 1990. "Specific capital and unemployment: Measuring the costs and consequences of job loss," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 33(1), pages 181-214, January.
  26. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, June.
  27. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2002. "Aktivierende Sozialhilfe - Ein Weg zu mehr Beschäftigung und Wachstum," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 55(09), pages 03-52, 05.
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