The insider-outsider theory is one of the approaches with which the persistence of unemployment can be accounted for. The central hypothesis says that the insiders, in other words the 'job holders', drive the wage level above the market-clearing level, thus creating a barrier that prevents new...

We analyze unemployment dynamics for Germany on a regional basis by means of an approximate factor model. We first estimate the number of factors corresponding to the number of cycles. At least for the pre-'Hartz' reform data we find strong evidence for more than just one dynamic labor market...