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Why does unemployment persist?

Layard, Richard and Bean, Charles ORCID: 0000-0002-6524-8280 (1989) Why does unemployment persist? Scandinavian Journal of Economics, 91 (2). 371 - 396. ISSN 0347-0520

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The main movements of unemployment correspond to fluctuations in the short-run NAIRU (around a stable long-term NAIRU). These supply-side fluctuations have two main origins: (i) variations in the number of "insiders" involved in wage-setting; (ii) variations in the effectiveness of the unemployed "outsiders" as potential job-seekers. The evidence of micro studies suggests that (ii) is more important than (i), and this also helps to explain the widespread shift outwards in the u/v curve. To derive these arguments rigorously, the paper presents a simple model of efficiency wages, another of collective bargaining, and finally a fully dynamic model with labour market flows.

Item Type: Article
Official URL:
Additional Information: © 1989 Wiley-Blackwell Publishing Ltd.
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
Date Deposited: 26 Jun 2008 13:23
Last Modified: 15 May 2024 23:31

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