Patterns of Unemployment: An Insider-Outsider Analysis

Assar Lindbeck and Dennis Snower

No 960, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Insiders; Labour Force; Outsiders; Persistence; Productivity; Unemployment (search for similar items in EconPapers)
JEL-codes: J31 J32 J38 J63 J64 J68 (search for similar items in EconPapers)
Date: 1994-07
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Citations: View citations in EconPapers (7)

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Working Paper: Patterns of Unemployment: An Insider-Outsider Analysis (1992)
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