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Is It Worth Reducing Exclusion?


  • Fabrice Collard

    () (CEPREMAP)

  • Patrick Fève

    () (Nantes University and CEPREMAP)

  • François Langot

    () (University of Le Mans and CEPREMAP)


We study the welfare implications of shutting down long-run unemployment and exclusion. We develop a heterogeneous-agents model along the lines of Krussell and Smith (1998) that takes the existence of uninsured long-run unemployment explicitly into account. The status of a given individual in the labor market is described by a three-states markov chain. Long-run unemployment is characterized by its higher persistence in the model and by lower unemployment spells. We assume that the government is able to eliminate long-run unemployment, and then we evaluate the potential welfare gains of such a policy.

Suggested Citation

  • Fabrice Collard & Patrick Fève & François Langot, 1999. "Is It Worth Reducing Exclusion?," Computing in Economics and Finance 1999 142, Society for Computational Economics.
  • Handle: RePEc:sce:scecf9:142

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    References listed on IDEAS

    1. Lee, C. B. & Murphy, W. D. & Fletcher, L. R. & Binner, J. M., 1998. "Dynamic entry deterrence in the UK pathology services market," European Journal of Operational Research, Elsevier, vol. 105(2), pages 296-307, March.
    2. Fudenberg, Drew & Tirole, Jean, 1987. "Understanding Rent Dissipation: On the Use of Game Theory in Industrial Organization," American Economic Review, American Economic Association, vol. 77(2), pages 176-183, May.
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