Whelan, KarlKarlWhelan2008-06-182008-06-181997-10http://hdl.handle.net/10197/254This 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.4304 bytesapplication/pdfenUnemploymentDuration dependenceE0J6UnemploymentEmployment re-entryWorking Paper10.2139/ssrn.94209https://creativecommons.org/licenses/by-nc-sa/1.0/