Can the insider-outsider theory explain unemployment hysteresis in OECD countries?

Bakas, D. ORCID: 0000-0003-4771-4505 and Makhlouf, Y. ORCID: 0000-0001-7737-3153, 2020. Can the insider-outsider theory explain unemployment hysteresis in OECD countries? Oxford Economic Papers, 72 (1), pp. 149-163. ISSN 0030-7653

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Abstract

Insider-outsider theory is often used as a basis for explaining the hysteretic behaviour of unemployment. Despite this, there is no empirical evidence about the validity of this theory on explaining the persistence of unemployment. This paper addresses this gap, using various labour market proxies of insiders' power for the OECD countries over 1960-2013 and employing panel unit root tests that exploit the information contained in these proxies. The results show that although the unemployment rate exhibits a pronounced hysteretic behaviour in OECD countries, this behaviour is reversed once we account for the insider-outsider proxies. Our findings thus validate the role of the insider-outsider theory as a key source of unemployment hysteresis.

Item Type: Journal article
Publication Title: Oxford Economic Papers
Creators: Bakas, D. and Makhlouf, Y.
Publisher: Oxford University Press
Date: January 2020
Volume: 72
Number: 1
ISSN: 0030-7653
Identifiers:
NumberType
10.1093/oep/gpz026DOI
690765Other
Divisions: Schools > Nottingham Business School
Depositing User: Linda Sullivan
Date Added: 21 Jan 2019 10:06
Last Modified: 10 Jan 2020 14:31
URI: http://irep.ntu.ac.uk/id/eprint/35620

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