On the Causes of Hysteresis in Long-Term Unemployment in the Netherlands

Johan Graafland

Oxford Bulletin of Economics and Statistics, 1991, vol. 53, issue 2, 155-70

Abstract: This paper investigates the empirical relevance of the insider-outsider and duration theory in explaining hysteresis in long-term unemployment. Estimation results of the wage equation show that long-term unemployment has no weaker influence on wages than short-term unemployment. This indicates that outsider status in wage formation and unemployment duration are not related. Estimation results of the U-V curve show that duration effects are more relevant, since long-term unemployment is found to have no influence on the vacancy rate. Simulation results of a small macro-labor market model show that long-term unemployment would have been considerably lower if duration effects had not occurred. Copyright 1991 by Blackwell Publishing Ltd

Date: 1991
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