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Unemployment and the durational structure of exit rates

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  • Karl Whelan

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.

Suggested Citation

  • Karl Whelan, 1997. "Unemployment and the durational structure of exit rates," Open Access publications 10197/254, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:oapubs:10197/254
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    File URL: http://hdl.handle.net/10197/254
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment; Duration dependence; Unemployment; Employment re-entry;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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