Unemployment and the durational structure of exit rates

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Title: Unemployment and the durational structure of exit rates
Authors: Whelan, Karl
Permanent link: http://hdl.handle.net/10197/254
Date: Oct-1997
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.
Type of material: Working Paper
Publisher: Federal Reserve
Keywords: Unemployment;Duration dependence
Subject LCSH: Unemployment
Employment re-entry
DOI: 10.2139/ssrn.94209
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Research Collection

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