Structural unemployment is a persistent labor market phenomenon arising from real shocks that alter job locations and types alongside institutional rigidities in hiring/firing regulations and unemployment benefit generosity. This theory posits that high rigidity indexes and generous replacement rates increase long-term duration by raising the costs of adjusting to economic changes, thereby widening the divergence between employed "insiders" with stable contracts and marginalized "outsiders." The concept belongs to macroeconomic labor market analysis as a mechanism explaining sustained mismatch unemployment where theoretical adjustments are constrained by non-market institutions rather than transient demand fluctuations.
Structural unemployment is a persistent labor market phenomenon arising from real shocks that alter job locations and types alongside institutional rigidities in hiring/firing regulations and unemplo…