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Loss of skill during unemployment and the persistence of employment shocks

Pissarides, Christopher (1992) Loss of skill during unemployment and the persistence of employment shocks. Quarterly Journal of Economics, 107 (4). pp. 1371-1392. ISSN 0033-5533

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This paper shows that when unemployed workers lose some of their skills, the effects of a temporary shock to employment can persist for a long time. The key mechanism is a thin market externality that reduces the supply of jobs when the duration of unemployment increases. The paper develops an overlapping-generations model of search equilibrium and shows that different patterns of persistence and multiple equilibria are possible even with constant returns production and matching technologies.

Item Type: Article
Official URL:
Additional Information: © 1992 The President and Fellows of Harvard College and the Massachusetts Institute of Technology
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 27 Apr 2007

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