IDEAS home Printed from https://ideas.repec.org/p/zbw/kondp1/245.html
   My bibliography  Save this paper

Unemployment and deterioration of human capital: A labour market model with hysteresis implications

Author

Listed:
  • Möller, Joachim

Abstract

The paper deals with the deterioration of human capital during spells of unemployment. In our model the probability of leaving the unemployment pool decreases with the duration of unemployment. It can be shown that with a linear deterioration function and a simple distribution function for the reservation productivity of firms, unemployment duration is suitably described by a distribution of the Gompertz-Makeham type. In a numerical simulation it could be demonstrated that deterioration of human capital during unemployment affects the relation between vacancies and unemployment in a specific way: in the case of labour market slackness the steady-state Beveridge curve markedly bends away from the standard u-v-curve in an outward direction while in an almost full employment situation the effects are negligible. For higher deterioration parameters the Beveridge curve may even be upward sloping in a situation of excess supply on the labour market implying the existence of multiple equilibria. Empirical estimation of the distribution function with German labour market data 1984-1987 reveals that the multiple equilibrium case is likely to be relevant in reality.

Suggested Citation

  • Möller, Joachim, 1989. "Unemployment and deterioration of human capital: A labour market model with hysteresis implications," Discussion Papers, Series I 245, University of Konstanz, Department of Economics.
  • Handle: RePEc:zbw:kondp1:245
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/68891/1/68691211X.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:bla:econom:v:47:y:1980:i:185:p:35-50 is not listed on IDEAS
    2. Budd, Alan & Levine, Paul & Smith, Peter, 1987. "Long-term unemployment and the shifting U-V curve : A multi-country study," European Economic Review, Elsevier, vol. 31(1-2), pages 296-305.
    3. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90, National Bureau of Economic Research, Inc.
    4. Lindbeck, Assar & Snower, Dennis J., 1987. "Efficiency wages versus insiders and outsiders," European Economic Review, Elsevier, vol. 31(1-2), pages 407-416.
    5. Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-884, December.
    6. Bent Hansen, 1970. "Excess Demand, Unemployment, Vacancies, and Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(1), pages 1-23.
    7. Budd, Alan & Levine, Paul & Smith, Peter, 1988. "Unemployment, Vacancies and the Long-term Unemployed," Economic Journal, Royal Economic Society, vol. 98(393), pages 1071-1091, December.
    8. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    9. Michael Burda, 1988. "Is there a capital shortage in Europe?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 124(1), pages 38-57, March.
    10. Abraham, Katharine G, 1983. "Structural-Frictional vs. Deficient Demand Unemployment: Some New Evidence," American Economic Review, American Economic Association, vol. 73(4), pages 708-724, September.
    11. Hargreaves Heap, S P, 1980. "Choosing the Wrong 'Natural' Rate: Accelerating Inflation or Decelerating Employment and Growth?," Economic Journal, Royal Economic Society, vol. 90(359), pages 611-620, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Holger Feist, 1998. "Wage-distance regulation in social-welfare programs: An option-theory perspective," Journal of Economics, Springer, vol. 68(3), pages 271-293, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Springer, K.A., 1989. "Wage rigidity and the persistence of unemployment," Serie Research Memoranda 0041, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. Franz, Wolfgang, 1990. "Hysteresis in Economic Relationships: An Overview," Empirical Economics, Springer, vol. 15(2), pages 109-125.
    3. Stevens, Philip Andrew, 2007. "Skill shortages and firms' employment behaviour," Labour Economics, Elsevier, vol. 14(2), pages 231-249, April.
    4. Charles Bean & James Symons, 1989. "Ten Years of Mrs. T," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 13-72, National Bureau of Economic Research, Inc.
    5. Hélène Zajdela, 1990. "Le dualisme du marché du travail : enjeux et fondements théoriques," Économie et Prévision, Programme National Persée, vol. 92(1), pages 31-42.
    6. Veli YILANCI & Yilmaz OZKAN & Abdulkadir ALTINSOY, 2020. "Testing the Unemployment Hysteresis in G7 Countries: A Fresh Evidence from Fourier Threshold Unit Root Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 49-59, September.
    7. Marco Guerrazzi, 2020. "Wage and employment determination in a dynamic insider–outsider model," Evolutionary and Institutional Economics Review, Springer, vol. 17(1), pages 1-23, January.
    8. Sujit Kapadia, 2005. "Optimal Monetary Policy under Hysteresis," Economics Series Working Papers 250, University of Oxford, Department of Economics.
    9. Carlsson, Mikael & Eriksson, Stefan & Gottfries, Nils, 2006. "Testing Theories of Job Creation: Does Supply Create Its Own Demand?," Working Paper Series 194, Sveriges Riksbank (Central Bank of Sweden).
    10. Jordi Galí, 2015. "Insider-outsider labor markets, hysteresis and monetary policy," Economics Working Papers 1506, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2020.
    11. Paqué, Karl-Heinz, 1989. "Wage gaps, hysteresis and structural unemployment: The West German labour market in the seventies and eighties," Kiel Working Papers 358, Kiel Institute for the World Economy (IfW Kiel).
    12. Zwick, Thomas, 1999. "Innovations induce asymmetric employment movements," ZEW Discussion Papers 99-24, ZEW - Leibniz Centre for European Economic Research.
    13. Seele, Stefanie & Burda, Michael, 2016. "No Role for the Hartz Reforms? Demand and Supply Factors in the German Labor Market, 1993-2014," VfS Annual Conference 2016 (Augsburg): Demographic Change 145650, Verein für Socialpolitik / German Economic Association.
    14. Cédric Tille, 1998. "Decomposition of the Unemployment Gap between Canada and the United States: Duration or Incidence?," Canadian Public Policy, University of Toronto Press, vol. 24(s1), pages 90-102, February.
    15. Magnus Gustavsson & Pär Österholm, 2010. "The presence of unemployment hysteresis in the OECD: what can we learn from out-of-sample forecasts?," Empirical Economics, Springer, vol. 38(3), pages 779-792, June.
    16. Gilles Saint-Paul, 2004. "Why are European Countries Diverging in their Unemployment Experience?," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 49-68, Fall.
    17. van de Klundert, T.C.M.J. & van Schaik, A.B.T.M., 1989. "Unemployment persistence and loss of productive capacity : A Keynesian approach," Other publications TiSEM c0b1af87-3e70-4128-8c48-c, Tilburg University, School of Economics and Management.
    18. Jordi Galí, 2015. "Hysteresis and the European unemployment problem revisited," Economics Working Papers 1488, Department of Economics and Business, Universitat Pompeu Fabra.
    19. Dinand Webbink & Pierre Koning & Sunčica Vujić & Nicholas G. Martin, 2013. "Why Are Criminals Less Educated than Non-Criminals? Evidence from a Cohort of Young Australian Twins," Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(1), pages 115-144, February.
    20. Shadman-Mehta, Fatemeh & Sneessens, Henri R., 1998. "Demand-Supply Interactions and Unemployment Dynamics: Can there be Path Dependency ? The Case of Belgium, 1955-1994," LIDAM Discussion Papers IRES 1998017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:kondp1:245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwkonde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.