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The Insider-Outsider Theory: A Survey

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Author Info
Lindbeck, Assar (IIES, Stockholm University and IUI, Stockholm)
Snower, Dennis () (Birkbeck College, University of London, CEPR and IZA Bonn)

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Abstract

This article is an idiosyncratic survey of the insider-outsider theory, describing the vision underlying the theory, and evaluating salient contributions to the literature in the light of this vision. We also indicate what appear to have been dead-ends and red herrings in past research. The first section deals with the theory, concerning how labor turnover costs influence insider wages and outsiders’ opportunities and how these costs affect employment and unemployment. We also address the more complex, and open, question of how employment and unemployment move through time, in response to labor market shocks. The second section deals with the insider-outsider theory in relation to two important economic institutions: unions and social norms. The third section confronts the relevant empirical evidence. Finally, the last section concludes by clarifying some common misunderstandings and identifying promising areas of future research.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 534.

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Length: 54 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:iza:izadps:dp534

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Related research
Keywords: employment; unemployment; wages; insiders; outsiders; unemployment persistence; social exclusion; labor turnover costs;

Other versions of this item:

Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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  1. Frederick van der Ploeg, 2003. "Do Social Policies Harm Employment and Growth?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Canegrati, Emanuele, 2007. "The Single-Mindedness of Labor Unions: Theory and Empirical Evidence," MPRA Paper 1398, University Library of Munich, Germany. [Downloadable!]
  3. Floro Ernesto Caroleo, 2004. "Fondamenti teorici della rigidità’ salariale nell’ambito dei “Non Market Clearing Models”," CELPE Discussion Papers 79, CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy. [Downloadable!]
  4. Anabela Carneiro & Pedro Portugal, 2006. "Market Power, Dismissal Threat and Rent Sharing: The Role of Insider and Outsider Forces in Wage Bargaining," IZA Discussion Papers 2102, Institute for the Study of Labor (IZA). [Downloadable!]
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  5. Bernd Hayo & Hans Peter Gruner & Carsten Hefeker, 2004. "Monetary policy uncertainty and unionized labour markets," Money Macro and Finance (MMF) Research Group Conference 2003 42, Money Macro and Finance Research Group. [Downloadable!]
  6. Frederick VAN DER PLOEG, 2004. "DO SOCIAL POLICIES HARM EMPLOYMENT? Second-best effects of taxes and benefits on labor markets," Economics Working Papers ECO2004/11, European University Institute. [Downloadable!]
  7. Johannes Rincke & Robert Schwager, 2005. "Skills, Social Mobility, and the Support for the Welfare State," cege – Center for European, Governance and Economic Development Research Discussion Papers 48, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany).. [Downloadable!]
  8. Hans Peter Grüner & Bernd Hayo & Carsten Hefeker, 2005. "Unions, wage setting and monetary policy uncertainty," Working Paper Series 490, European Central Bank. [Downloadable!]
  9. Norbert Berthold & Rainer Fehn, 2003. "Unemployment in Germany: Reasons and Remedies," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  10. canegrati, emanuele, 2007. "The single-mindedness of labor unions when transfers are not Lump-Sum," MPRA Paper 2320, University Library of Munich, Germany. [Downloadable!]
  11. Horst Feldmann, 2008. "Business regulation and labor market performance around the world," Journal of Regulatory Economics, Springer, vol. 33(2), pages 201-235, April. [Downloadable!] (restricted)
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