Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment
University of Toronto
University of Chicago - Booth School of Business
March 1, 2013
Chicago Booth Research Paper No. 13-56
This paper studies the role of employer behavior in generating “negative duration dependence” - the adverse effect of a longer unemployment spell - by sending fictitious resumes to real job postings in 100 U.S. cities. Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker’s unemployment spell, with the majority of this decline occurring during the first eight months. We explore how this effect varies with local labor market conditions and find that duration dependence is stronger when the local labor market is tighter. This result is consistent with the prediction of a broad class of screening models in which employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets.
Number of Pages in PDF File: 43
JEL Classification: J64
Date posted: June 4, 2013
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