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Loss of skill during unemployment and the persistence of employment shocks

By Christopher Pissarides

Abstract

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

Topics: HB Economic Theory, HD Industries. Land use. Labor
Publisher: Oxford University Press
Year: 1992
DOI identifier: 10.2307/2118392
OAI identifier: oai:eprints.lse.ac.uk:1145
Provided by: LSE Research Online
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