Reassessing the Ins and Outs of Unemployment

41 Pages Posted: 18 Sep 2007 Last revised: 12 Nov 2013

See all articles by Robert Shimer

Robert Shimer

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: September 2007

Abstract

This paper uses readily accessible data to measure the probability that an employed worker becomes unemployed and the probability that an unemployed worker finds a job, the ins and outs of unemployment. Since 1948, the job finding probability has accounted for three-quarters of the fluctuations in the unemployment rate in the United States and the employment exit probability for one-quarter. Fluctuations in the employment exit probability are quantitatively irrelevant during the last two decades. Using the underlying microeconomic data, the paper shows that these results are not due to compositional changes in the pool of searching workers, nor are they due to movements of workers in and out of the labor force. These results contradict the conventional wisdom that has guided the development of macroeconomic models of the labor market during the last fifteen years.

Suggested Citation

Shimer, Robert J., Reassessing the Ins and Outs of Unemployment (September 2007). NBER Working Paper No. w13421. Available at SSRN: https://ssrn.com/abstract=1014798

Robert J. Shimer (Contact Author)

University of Chicago - Department of Economics ( email )

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