Unemployment hysteresis and the worker discipline effect

European

Journal

of Political

Economy

8 (1992) 543-556.

Unemployment hysteresis discipline effect Francis

Green*

University

of Leicester,

Accepted

for publication

Leicester,

North-Holland

and the worker

UK

December

1991

A model of unemployment hysteresis based on insider/outsider dynamics is analysed, wherein worker effort is affected by the cost of job loss if dismissed for shirking. For someone who has already been employed for a period or more, raising the probability of finding re-employment unambiguously improves the speed of adjustment of unemployment towards its equilibrium level; however, its effect on that equilibrium level is ambiguous. If unemployment benefits are below a critical level, determined by the disutility of unemployment, a rise in the re-employment chances of the unemployed will increase equilibrium unemployment. For someone who has just been dismissed, or made redundant due to unexpectedly low demand, raising the probability of immediately finding re-employment has ambiguous effects both on the equilibrium level of unemployment and on the speed of adjustment towards the equilibrium.

1. Introduction

The experience of high unemployment rates in many countries in the 1970s and 1980s has given rise to a number of new models, each of which attempts to explain specific features of the problem. Economic theory is still, however, a long way off an integrated theory which captures all the essential aspects in one swoop. The particular problem which this paper aims to highlight is that even though different models may apparently be directed at different features of unemployment, their predictions can turn out to be in contradiction with each other. This problem is exemplified by an examination of an intersection of two approaches that have received wide attention: the notion of hysteresis, as an explanation of unemployment persistence, and the ‘worker discipline effect’ as an explanation of positive equilibrium unemployment. While the approaches appear at first to be directed at different aspects of unemployment - its dynamic path in the case of hysteresis models and the equilibrium

Correspondence to: Francis Green, Department University Road, Leicester LEl 7RH, UK. *I am grateful to Paul Levine and Peter Skott remaining errors are my own. 017&2680/92/$05.00

((3 1992-Elsevier

of Economics, for helpful

Science Publishers

The University

comments

of Leicester,

and suggestions.

B.V. All rights reserved

Any

544

F. Green, Unemployment

hysteresis

level in the case of ‘worker discipline effect’ models ~ they each depend critically on assumptions about how hard it is for unemployed workers to get back to work. Hysteresis models generally conclude that a more ‘flexible’ labour market would improve matters by hastening the route towards equilibrium, thereby reducing the unemployment normally associated with downward wage rigidity. Yet, as I am to show here, it is possible that, given the worker discipline effect, a more ‘flexible’ labour market could raise the equilibrium unemployment rate. Hysteresis models address the fact that, in Europe in particular, the high unemployment levels that began in the late 1970s and early 1980s persisted for a long time, and indeed have still not disappeared [Blanchard and Summers (1987, 1988)]. Unemployment is found to depend on its own past levels, and not just on current variables indicating the state of demand and a constant natural rate. Three explanations for this have been given. First, owing to turnover costs in the labour market ‘insiders’, those with jobs, are able to determine a wage rate above the reservation wage of otherwise similar unemployed potential workers. Insiders set the wage rate so as to keep employed their own membership. A second argument is that skills deteriorate through lack of use in unemployment. Hence the long-term unemployed become especially poor substitutes for existing workers. Third, though this is less frequently stressed physical capital may be excessively scrapped in a severe recession, so that when demand later expands there is insufficient capital stock to employ the workforce. While most emphasis has been given to the insider/outsider theory [see, for example, Lindbeck and Snower (1986)] these three explanations are not mutually exclusive. In addition to the stylised fact of high unemployment persistence, there is plenty of evidence for some sort of hysteresis behaviour of unemployment. Estimates of the NAIRU show otherwise unexplained rises in the 1980s [Layard and Nickel1 (1987); Jenkinson (1987)]; there are direct tests of the impact of lagged unemployment [Alogoskoufis and Manning (1988)]; there are several explorations which show the role of unemployment changes, or of the short-term/long-term unemployment ratio in wage equations [Cross (1988); Graafland (1989)]; and the theory provides a consistent explanation of outward-shifting European U-V curves in the 1980s [Budd et al. (1987)l.l Hysteresis models of unemployment are essentially concerned with dynamics. Typically, the long-run equilibrium is unaffected by hysteresis, and, provided that there is not a lOOo/, insider determination of wages, there is expected to be an eventual return to this equilibrium. An alternative strand

‘What remains controversial is the question of how much of the difference between the unemployment performance of Europe and the U.S. can be put down to hysteresis [Manning and Alogoskoufis (1988)].

545

F. Green, Unemployment hysteresis

of thinking has focussed on the role that incomplete labour contracts play in Amongst several effort-regulation the determination of this equilibrium. models [Akerlof and Yellen (1986)] one of the most prominent is based on the ‘worker discipline effect’. Motivating this approach is the observation that capitalist economies appear generally unable to sustain very low unemployment rates indefinitely. This has led to the hypothesis that, even in a competitive economy with structural problems of mismatch taken care of, a finite unemployment rate will prevail, due to the inability of firms to monitor perfectly the effort devoted by reluctant workers. Unemployment acts as a threat, providing a non-zero ‘cost of job loss’ which motivates rational workers to devote effort to their work [Bowles (1985); Shapiro and Stiglitz (1984)]. There is, for this stream of unemployment modelling also, a mounting body of consistent empirical studies. This evidence confirms that unemployment does have some impact on worker effort, at least for those sections of the economy, where more positive means of worker motivation, such as the fostering of company loyalty and job satisfaction, are less viable [Rebitzer (1987); Green and Weisskopf (1990); Weisskopf (1987)]. Though aimed at different aspects of the unemployment problem, these two approaches are in conflict about the impact of the degree of ease with which the unemployed can return to work. In hysteresis models, the greater the ease with which ‘outsiders’ can become ‘insiders’ the quicker the path to equilibrium. The implied policy conclusion is to ‘re-enfranchise’ the unemployed, particularly the long-term unemployed.2 Under the worker discipline effect it is the threat of not getting back to work quickly which gives to the employed the incentive for hard work. Thus, for example, a rise in the number of vacancies deriving from greater quitting would lead, in the Shapiro and Stiglitz model, to a higher ‘non-shirking wage’, and greater unemployment. In general the greater the ease of getting back to work the lower, ceteris paribus, the cost of job loss. In principle, at least, this poses a possible policy dilemma for governments interested in reforming labour markets. If labour markets are rendered more ‘flexible’ in order to ensure a greater access to jobs for the unemployed, they might at the same time raise the equilibrium level of unemployment. In the following model, I combine elements of the hysteresis and worker discipline approaches in order to explore this potential dilemma. The aim is to investigate the effects on unemployment of improving labour market flexibility, as represented by an improved chance for unemployed workers to return to work. The main analysis, which makes use of the insider/outsider framework and terminology, is described in section 2. Section 3 briefly sets out the conclusion and some implications.

‘See, for example,

Blanchard

and Summers

(1988, p. 356); Adams

(1988, p. 395).

546

F. Green,

Unemployment

hysteresis

2. Insiders, worker discipline, and unemployment 2.1. Firms The model here builds on some of the features and assumptions of the insider-outsider approach to hysteresis developed by Blanchard and Summers (1987). Output, Q, is produced in many firms, using a single input, labour, under constant returns to scale. However worker effort is imperfectly observed and so there is a disjuncture between labour-power, the commodity bought by firms, and effective labour. Thus, for the ith firm, Qi=FiLi,

O
1

(1)

where Li is labour-power exchanged, Fi is worker effort, and where the units of Qi are normalised to produce a constant of unity. The demand for the firm’s product depends both on consumers’ real money balances, and the relative price of the product

q<-1 where M is the money supply, Pi is the price of firm i’s output general price level. Profit maximisation implies that

w=P,F,

(2) and

P the

(3)

where w is the nominal wage the firm must pay. Assuming identical firms, and a symmetric equilibrium, yields Pi= P and w= W, the general wage level. These may be inserted into (1)43), and the index i dropped since employment and output are the same in all firms. Hence employment is given by

(4)

However, there is uncertainty over the money supply and aggregate demand. Expected labour demand deviates from according to the relation

hence over the actual,

F. Green, Unemployment

hysteresis

547

(5)

where E is the expectations

operator.

2.2. Worker discipline In every firm, it is assumed that there is imperfect monitoring of effort, and that there is but one means of motivating effort, namely the threat of dismissal. F can be thought of as the proportion of each period spent working, not shirking, by each employee. If workrate is monitored once, at a random moment in each period, and if workers are fired at the end of a period with certainty if caught shirking, the probability of being thus dismissed is p=l-F.

2.3. Insiders and the employment

(6) path

Wages are assumed to be set on the basis of (5) by the membership of ‘insiders’, who are those employed and not dismissed at the end of each period. Firms respond by demanding so much labour according to (4). It is assumed that wages are set at the start of each period before nominal money (hence aggregate demand) is known. Insiders are able, moreover, to set wages largely in their own interest since they know it would be impossible or costly to replace them with outsiders. 3 This power, however, is limited. Insiders are likely to take some account of outsiders, owing to the possibility of entry by new firms, or direct wholesale substitution of workforces by unemployed workers. Alternatively, they indirectly allow for some extra jobs, over and above insider membership, in times of high unemployment. I shall capture this outsider pressure on wages and its effects on the path of employment in a manner similar to Blanchard and Summers (1987) by assuming a perfectly inelastic labour supply: It is assumed that wages are set such that expected employment is equal to the sum of: (a) those employed last period and not dismissed at the end of it; and (b) certain proportions of the rest of the labour force. The latter group consists of two subgroups. These are, first, those workers who have just been fired at the end of last period, and those who become redundant at the start of the current period 3This assumption of worker-determined wages sets the model apart from typical efficiencywage models which make no reference to insider power or alternative hysteresis features. In such models, firms are assumed able to vary wages, but choose not to accept unemployed workers offering to work for lower wages owing to the problem of enforcement of effort.

548

F. Green, Unemployment

hysteresis

due to unexpectedly low demand. I assume that in any one period a proportion j of this subgroup is expected to regain employment and insider status immediately. Next, there are those workers who were unemployed last period. I assume a proportion k of this subgroup are expected to obtain jobs in the current period. It might be argued that the determination of j and k should itself be modelled explicitly. Such a requirement would naturally greatly complicate In this paper the more tractable the assumed wage-setting behaviour. simplifying asumption of the Blanchard and Summers (1987) model is preferred, in that the aim is not to explore completely general conclusions but to investigate and illustrate the possibility of seemingly perverse conclusions in a relatively simple context: hence j and k are taken to be exogenous. Both are measures of a kind of flexibility of the labour market, and while determined by institutional relationships can presumably be influenced by policy.4 For example, government-backed retraining for the unemployed can be seen as an attempt to raise k. Employment agencies which help the flow of job market information can aim to raise j or k. Let IV be the total labour force, assumed constant. Then (N-L,_ i) is the total of last period’s unemployment. Thus expected employment satisfies (7) The first term gives the total number of employees not dismissed at the end of the previous period, and the second and third terms give respectively the numbers of newly-dismissed workers and last period’s unemployed who are expected to be able to regain employment: The insider principle expressed in (7) and the labour demand function (5) thus combine to determine wages, and give a path of employment:

(8) where h,=( 1 -k) -pt_ 1( 1 - j).Assuming p to be determination of p below), we may write h,=h; familiar pattern of hysteresis, with the path towards surprise money shock determined by the parameters in a pure insider model where current employees

constant (I discuss the and eq. (8) exhibits the equilibrium following a p, j and k. For example, can completely disregard

“There are of course other dimensions of labour market flexibility, with respect, for example, to pay, to hiring and tiring rules generally, or to working hours [Emerson (1988); Klau and Mittelstadt (1986)]. In respect of firing, the model here assumes perfect flexibility, in that there are no restrictions on dismissal of workers discovered shirking. It is likely that if there were some such restrictions, they would also have an influence on the chances of re-employment, j and k, but this complication is not considered here.

F. Green, Unemployment

hysteresis

549

the unemployed, and with costless perfect monitoring of effort, all three parameters are zero and employment follows a random walk. What is of interest here, however, is that with imperfect monitoring the parameters are not independent. Worker effort is likely to be affected by the chances of reemployment if dismissed for shirking, which depend on j and on k. At the same time, the fraction dismissed, p, depends on worker effort, according to (6). This interdependence affects both the path towards equilibrium and the level of equilibrium employment. Raising k unambiguously lowers the hysteresis autoregression coefficient, h, in two ways. It brings in more outsiders and, by encouraging less effort from workers who have a reduced cost of job loss, raises the dismissal rate, in effect converting more insiders to outsiders. In this sense an increased flexibility of the labour market, allowing outsiders a greater chance of re-entering employment, results in a faster path towards equilibrium. Raising j, however, has an ambiguous effect, given by: dh - $0 dj

according

as

l_jdp,l. P

dj5

The intuition behind this is that, for a given dismissal rate, a higher j keeps more employees as insiders which tends to increase hysteresis; but through reduced discipline a higher j also raises the dismissal rate. The equilibrium employment rate, obtained by setting E M,= Mi for all t, is

,*=L*= N

k

(10)

p(l-j)+k’

Hence, in equilibrium there is positive unemployment in general, as long as p>O. It will be noted that, unlike in earlier models of hysteresis, here the degree of hysteresis does affect the equilibrium level of unemployment, though only via its interaction with worker discipline. Had there been perfect and costless monitoring of work effort then p would be zero, and the longrun equilibrium employment rate would be unity, though there would still be hysteresis in the path of adjustment. In the present case, however, with imperfect monitoring, rises in j or in k affect the employment rate in the following way: dE* di 5 0

according

as

~kdps ~ 5 1, P dk

(11)

550

F. Green, Unemployment

dl* $0 dj

according

as

l---dp
hysteresis

(12)

It follows that to increase the ‘flexibility’ of the labour market may worsen the equilibrium unemployment rate, depending on the elasticities of the dismissal rate with respect to the chances of re-employment of the newly dismissed and the unemployed. It may be noted from (9) and (12) that changes in j will affect the hysteresis coefficient and the equilibrium unemployment rate in the same direction. Accordingly I now examine the determinants of these elasticities.

2.4. The worker’s effort While insiders determine the wage rate so that all non-dismissed workers (plus the incoming outsiders) are expected to be employed, individual workers must still decide how much effort to devote to work. If caught shirking, the future unemployment represents a cost, to be set against the disutility of the effort necessary to minimise the chances of dismissal5 While it is often assumed that the protective ring of insider status is an unambiguous benefit to employees, it also enhances the discipline which they must observe if they wish to remain protected members of the club. Rational workers will observe the difficulty of regaining employment in the short term, if fired, and even greater difficulty they will encounter should they fail to find another job at the start of next period. They will realise too that they will have no influence over their chances of re-employment. With an infinite horizon, I assume the total expected utility of work is given by

(13)

where r is the discount rate and where U, is the one-period expected utility, which depends on the relative probabilities of employment or unemployment. Let the one-period utility of being employed be wa( 1 - F)p, where O-CCC c 1 and 0~ /I< 1, and where w is the real wage, and consider the decision of an insider in year 1. Although workers collectively will have set the wage in the knowledge that prices will thereby be determined via (3) and workers 51n order to conceive of this in realistic terms, one does not have to restrict this fear of unemployment to dismissal alone it can also help to stave off redundancy if workers are made to feel they must work harder to enable their lirm to survive. Moreover, many acts of dismissal where it is beneficial to one or both may in practice appear as redundancies or ‘resignations’, parties to disguise the fact of dismissal.

F. Green, Unemployment hysteresis

551

subsequent effort decisions, from the point of view of the individual worker, the price level is fixed, and hence also is the real wage. It is the effort level that has to be decided.6 The elements of expected utility in year 1 and in subsequent years may be written as

tg

(I

Ut=(l +lr)f-’

--Pl

+Plj)l/,.e+(l

-m1/,,,,,

(15)

including the where I& is the expected year t value of being employed, expected discounted value of year t + 1 and later employment and unemploydefined expected year t value of ment prospects, V,.,, is the analogously being unemployed. The expected value of work is affected by the future possibility of being unemployed according to the relation

r/;, e

=

wf( 1 - F,)B + ilir(‘-P,+“,j)Y+,,,+~PIc;+,,,..

Similarly, the value of being out of work is affected by the future prospect a return to work,

of

(17)

where Z is the one-period utility associated with the state of unemployment. There are many factors that might be thought to affect Z. On the positive side there are the unemployment benefits and increased ‘leisure time’, while on the negative side there are the social, psychic and physical costs of unemployment [Junankar (1986)]. For simplicity, I write Z as Z=b”-Z,,

(18)

“The decision over wage setting for the insider group and the decision over effort by each individual worker are related. In setting wages, the membership have to take into account both the probability of unemployment due to surprise shortfalls in demand, and the balance of beneftts from employment and unemployment, namely the utility from wages, the disutility of work effort, and the utility or disutility associated with unemployment. Both in setting wages, and in deciding on effort, workers have to take into account the future difficulties of getting back into employment, should they become unemployed. In adopting the Blanchard and Summers assumption of perfectly inelastic labour supply, so as to make the problem analytically tractable and to focus on the relationship between k or j and p. there is no reason to suppose that assumption is inconsistent with the utility function analysed below, given flexibility also in specifying the probability of unemployment arising through surprise recession.

552

F. Green, Unemployment

where b disutility In the w,, and using (6)

hysteresis

is real unemployment benefits, assumed constant, and 2, is the associated with being unemployed. current period, the worker chooses effort F,, on the basis of given expected future wages and prices. For an interior solution, and

(19) The second-order condition is that d252/i3Ff ~0, which holds since P-C 1. The solution for F, rests on how workers are assumed to forecast future wages, future effort decisions and hence the future values of employment and unemployment. I assume that current insiders will forecast that future insiders will set the nominal wage in the same way that they are set in the present, that is, to ensure an appropriate expected labour demand according to (5) and (7). They will also predict, however, that prices will react according to (3). The optimisation problem facing employed workers in period 2 will be the same as that which period 1 employed workers currently face, given no change in j or k. Hence both real wages and effort will be forecasted to be the same for the employed worker in the future as in the present. Thus I set I& = V’, constant, and V,,,, = VU,,,constant. Substituting into (16) and (17) and solving out gives v_v e

_W-F)“-Z “”

p(l-j)+r+k’

The numerator of familiar from certain whole expression, the unemployed, can be Substituting into (19)

(20)

this expression is the one-period ‘cost of job loss’ earlier ‘worker discipline’ models [Bowles (1985)]. The difference between the utility of the employed and the thought of as the ‘infinite-horizon cost-of-job-loss’. and using (6), gives p as the solution to (21)

Depending on the value of b, there are likely to be multiple solutions for p, not all falling in the economically meaningful range 0 5 p 2 1. Nonetheless, without deriving a general solution, we can investigate the determination of p in one special case of interest and can use (21) to examine the effect of k or j on p. In the special case where Z=O, that is, where unemployment benefits exactly match the social, psychic and physical costs of unemployment, b” = Zo, the solution is

F. Green, Unemployment

B(l +W+V “(l-

j)[l-/?(l

+r)]’

hysteresis

553

(22)

Hence kdp

k

pdk

r+k’

(23)

and

l-jdp=l __P dj

(24)

With all workers assumed identical, these results may be compared with conditions (9), (11) and (12). From (9), (12) and (24), raising the immediate re-employment chances of the newly redundant and newly dismissed has no effect on the degree of hysteresis, and no effect on equilibrium unemployment. In this case the greater ease with which they are returned to work exactly balances the effect of greater dismissals resulting from reduced work effort. However, from (11) and (23), raising the chances of re-employment for the unemployed lowers the equilibrium unemployment rate, as long as workers have a positive discount rate. These conclusions are altered, however, if we now drop the assumption of zero utility in unemployment. Differentiating (21) with respect to j and k, allowing real wages to vary via (3), and re-arranging, gives the elasticities

kdp -= pdk

k

(1-j) dp P

(25)

r+k+poZ’

d.i =1+

1

(26)

where

For ‘small’ p it follows that p >O and v >O. Hence the elasticities would be increased (decreased) in comparison to those given by (24) and (25) if benefits are less than (greater than) Z, lia . Thus with large enough disutility associated with unemployment, a policy of increasing j or k will reduce hysteresis effects but also reduce equilibrium employment. The policy conclusion that arises from this is that raising labour market flexibility is only supportable as a means of cutting unemployment in the long term if the level of unemploy-

J.Pol E

B

554

F. Green, Unemployment

hysteresis

ment benefits is above a certain critical level. In regard to raising the immediate re-employment chances of the newly dismissed, this critical level of benefits is 2;‘“; in the case of those who have been unemployed the critical level is [Z, -r/pa] I”. If benefits are below these levels, the effect of raising the chances of getting back to work would lift the threat of dismissal, sufficiently to lower effort, lower real wages and raise the equilibrium level of unemployment - an apparently perverse result that derives ultimately from the incomplete nature of the labour contract. One final, and more familiar result, concerns the effect on effort and employment of a rise in unemployment benefits. From (21) we obtain

dp _ db

cxbzml ~S(l--p)“[l-_B(l+r)]-(l-_P)oZ’

which is positive for fi< l/(1 +r) and for small enough Z. guaranteed, in the case r=O, by the assumption that the utility exceeds that from unemployment, and hence that there is labour supply. Thus a rise in unemployment benefits on improves the effectiveness of a policy to raise flexibility (the and naturally it raises the welfare of the unemployed, but on it also lowers work effort.

(27)

This latter is from working some positive the one hand earlier result), the other hand

3. Conclusion It is unsurprising that, with such a complex and ill-understood phenomenon as the labour market, there arise multiple explanations for when that market appears to fail, as it does when unemployment exists. Although these explanations may be addressed to different aspects of the problem, they are sometimes in conflict. They are rarely brought together in an integrated analysis, owing no doubt to the desire to keep analyses tractable. In the analysis here I have made no pretence to generality in attempting to integrate some features of the labour market stressed in two recent approaches - namely the ‘hysteresis’ and the ‘worker discipline effect’ models of unemployment. In the model I employ, there are two sources of unemployment. Insider domination of wage-setting ensures that most though not all outsiders are restricted from offering to undercut the wages of existing workers. Whenever a surprise shortfall in demand causes workers to be made redundant, the unemployment persists as the now-redundant workers can no longer compete on equal terms with insiders. This labour market rigidity, however, is the very factor which helps to elicit effort from the employed workers. A positive effort requires a positive threat from dismissal. The unemployment is

F. Green, Unemployment

hysteresis

555

involuntary since outsiders are presumed to be willing to work at lower or equal wages, but only certain proportions of the newly dismissed or redundant workers or of the unemployed can gain entry. These proportions could not be raised to unity, since that would lower the equilibrium dismissal threat to zero, and hence effort, output and employment would vanish. In this paper I have explored the effect of increasing one form of flexibility, measured by the proportions of outsiders re-gaining insider status in each period. There is an improvement in the hysteresis coefficient, giving a quicker path towards equilibrium unemployment, if those who have been unemployed are given a greater probability of return to employment. The impact on the hysteresis coefftcient of raising the return-to-work probability of newly redundant and dismissed workers is, however, ambiguous. The effects on equilibrium unemployment depend on the assumptions made - both about the form of the utility function for the employed and, in particular as I have discussed, about the benefits and costs of being unemployed. Using a conventional utility function the model predicts that, when unemployment benefits are low relative to the psychic and other costs of unemployment, a rise in ‘labour market flexibility’ would raise the equilibrium unemployment rate. The intuition behind this seemingly perverse result is that, where unemployment is to be especially dreaded, there would be a large marginal reduction in the cost of job loss for any given rise in the chances of reemployment, and hence a substantial reduction in worker effort and increase in dismissals for shirking.’ Since mono-causal explanations are rarely if ever proved correct in economics, further integration of the results of alternative explanations of unemployment may well be warranted. ‘While no particular stylised fact is drawn attention to by the conflict highlighted here, the lack of unemployment has been seen as contributing to low worker effort in East European nations before their return to capitalism. The ‘perverse’ result suggested in this paper could have a special relevance in those countries, where unemployment is now soaring, and where beleaguered state budgets may afford only very low unemployment benefits.

Adams, C., 1988, Hysteresis effects and unemployment, in: R. Cross, ed., Unemployment, hysteresis and the natural rate hypothesis (Basil Blackwell, Oxford). Akerlof, G.A. and J.L. Yellen, eds., 1986, Efficiency wage models of the labour market (Cambridge University Press, Cambridge). Alogoskoutis, G.S. and A. Manning, 1988, Wage setting and unemployment persistence in Europe, Japan and the U.S.A., European Economic Review 32, 698-706. Blanchard, O.J. and L.H. Summers, 1987, Hysteresis in unemployment, European Economic Review 31, 2888295. Blanchard, O.J. and L.H. Summers, 1988, Hysteresis and the European unemployment problem, in: R. Cross, ed., Unemployment, hysteresis and the natural rate hypothesis (Basil Blackwell, Oxford).

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F. Green, Unemployment hysteresis

Bowles, S., 1985, The production process in a competitive economy: Walrasian, neo-Hobbesian and Marxian models, American Economic Review 75, 12-36. Budd, A., P. Levine and P. Smith, 1987, Long-term unemployment and the shifting U-V curve, European Economic Review 31, 296305. Cross, R., ed., 1988, Unemployment, hysteresis and the natural rate hypothesis (Basil Blackwell, Oxford). Emerson, M., 1988, Regulation or deregulation of the labour market, European Economic Review 32, 775-817. Graafland, J.J., 1989, Can hysteresis explain different labour market operations between Europe and the United States?, Applied Economics 21, 955111. Green, F. and T.E. Weisskopf, 1990, The worker discipline effect: A disaggregative analysis, Review of Economic Statistics 72, 241-249. Jenkinson, T., 1987, The natural rate of unemployment: Does it exist?, Oxford Review of Economic Policy 3, 20-26. Junankar, P.N., 1986, Social costs of unemployment, University of Essex, Economics Department, Discussion Paper 292, July. Klau, F. and A. Mittelstadt, 1986, Labour market flexibility, OECD Economic Studies 6, 746. Layard, R. and S. Nickell, 1987, The labour market, in: Rudiger Dornbusch and Richard Layard, eds., The performance of the British Economy (Oxford University Press, Oxford). Lindbeck, A. and P.J. Snower, 1986, Wage setting, unemployment and insider-outsider relations, American Economic Review, Papers and Proceedings 76, 235-239. Manning, A. and G.S. Alogoskoufis, 1988, On the persistence of unemployment, Economic Policy 7, 427469. Rebitzer, J.B., 1987, Unemployment, long-term employment relations, and productivity growth, Review of Economics and Statistics 69, 6277635. Shapiro, C. and J.E. Stightz, 1984, Equilibrium unemployment as a worker discipline device, American Economic Review 74,4333444. Weisskopf, T.E., 1987, The effect of unemployment on labour productivity: An international comparative analysis, International Review of Applied Economics 1, 129-151.