Glossary of economics research
Results of search for hysteresis follow:
hysteresis:
a hypothesized property of unemployment rates -- that there is a ratcheting
effect, so a short-term rise in unemployment rates tends to persist.
Theories that would lead to hysteresis:
-- an insider/outsider model of decisionmaking about employment; insiders such
as the unionized workers ratchet up wage rates beyond where it is profitable
to hire the unemployed; outsiders who are unemployed don't get to be part of
the negotiation process.
-- behavioral and human capital changes among the unemployed, such as
forgetting the details of work or work behavior, or losing interest or skill
in getting new jobs, could lead to declining chances of becoming
employed.
Source: Blank, "Changes in Inequality and unemployment over the
1980s", J Population Economics, 1995 8:1-21 pg 5
Contexts: macro; labor; models
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