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The Insider-Outsider Theory: A Survey


Assar Lindbeck


Stockholm University - Institute for International Economic Studies (IIES); CESifo (Center for Economic Studies and Ifo Institute); Research Institute of Industrial Economics (IFN)

Dennis J. Snower


University of Kiel - Institute for World Economics (IfW); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

July 2002

IZA Discussion Paper No. 534

Abstract:     
This article is an idiosyncratic survey of the insider-outsider theory, describing the vision underlying the theory, and evaluating salient contributions to the literature in the light of this vision. We also indicate what appear to have been dead-ends and red herrings in past research. The first section deals with the theory, concerning how labor turnover costs influence insider wages and outsiders' opportunities and how these costs affect employment and unemployment. We also address the more complex, and open, question of how employment and unemployment move through time, in response to labor market shocks. The second section deals with the insider-outsider theory in relation to two important economic institutions: unions and social norms. The third section confronts the relevant empirical evidence. Finally, the last section concludes by clarifying some common misunderstandings and identifying promising areas of future research.

Number of Pages in PDF File: 54

Keywords: Employment, Unemployment, Wages, Insiders, Outsiders, Unemployment Persistence, Social Exclusion, Labor Turnover Costs

JEL Classification: J23,J24,J31,J32,J38,J41,J42,J51,J63,J64,J68

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Date posted: August 21, 2002  

Suggested Citation

Lindbeck, Assar and Snower, Dennis J., The Insider-Outsider Theory: A Survey (July 2002). IZA Discussion Paper No. 534. Available at SSRN: http://ssrn.com/abstract=325323

Contact Information

Assar Lindbeck
( email )
Stockholm University
10691 Stockholm, SE-10691
Sweden
+46 8 163 078 (Phone)
+46 8 162 946 (Fax)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://www.CESifo.de
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
HOME PAGE: http://www.ifn.se/assarl
Dennis J. Snower (Contact Author)
University of Kiel - Institute for World Economics (IfW) ( email )
Duesternbrooker Weg 120
D-24118 Kiel
Germany
+49+431-8814-235 (Phone)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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