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Unemployment and the durational structure of exit rates
Author(s)
Date Issued
1997-10
Date Available
2008-06-18T13:44:18Z
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
Series
Finance and Economics Discussion Series
No. 97-54
Keywords
Classification
E0
J6
Subject – LCSH
Unemployment
Employment re-entry
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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