ABSTRACT
One of the basic questions in economic theory is why modern economies are incapable of employing, fully and efficiently, their available resources. Unemployment of labor force seems to attract the greatest attention of researchers. Unemployed men cost society dearly. They may diminish their human capital through different kinds of “depreciation.” A high rate of unemployment is often associated with social unrest and high crime rates. In many countries, high unemployment is persistent. In 1995, for instance, the proportion of unemployed workers who had been unemployed for more than a year exceeded 30 percent in most European countries. It is one thing to be unemployed for a few days or even a few months; but quite another to be unemployed for a few years. Those who become long-term unemployed end up losing skills and work habits.
