This study shows, within an insider-outsider model, the persistence of unemployment in Italy in the period 1988-1998. The basic model has been analysed under the rational expectation hypothesis in order to capture the effects on the employment level after a shock. We found the presence of hysteresis in the labour market, that is, the unemployment variable follows a random walk. Moreover, using a Kalman filter approach, we determined a "backward-looking" process for the employment coefficient "at" . The empirical results show that, when the two sub-samples are considered, the insider-outsider model is still valid but the coefficient "at" shows a consistent decrease. An explanation of this decrease is related to the incomes policy pursued by the government since the 1992. JEL Classification: J2 J3 E4