Unemployment and the durational structure of exit rates

Karl Whelan ()

Open Access publications from School of Economics, University College Dublin

Abstract: This paper presents a simple model of wage bargaining and employment flows designed to address the effects of policies to increase the rate of exit to employment of the long-term unemployed. Exit rates from long- and short-term unemployment have two effects on the unemployment rate: a positive one as high exit rates strengthen current employees' bargaining positions, and thus wages, and a negative one as faster outflows from unemployment reduce the stock of unemployed. Thus, there is a trade-off between the exit rate from long-term unemployment and the exit rate from short-term unemployment. The paper's principal result is that, in steady-state, increasing the exit rate from long-term unemployment reduces the unemployment rate. Dynamic simulations show that raising the exit rate of the long-term unemployed leads to a decrease in both the mean and variance of the unemployment rate.

Keywords: Unemployment; Duration dependence; Unemployment; Employment re-entry (search for similar items in EconPapers)
JEL-codes: E0 J6 (search for similar items in EconPapers)
Date: 1997-10
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http://hdl.handle.net/10197/254 First version, 1997 (application/pdf)

Related works:
Working Paper: Unemployment and the durational structure of exit rates (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:oapubs:10197/254

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