The Anatomy of Unemployment Dynamics
Tinbergen Institute Working Paper No. 94-95 (revised)
43 Pages Posted: 1 Aug 1999
Date Written: May 7, 1999
This paper examines the relation between individual unemployment durations and incidence on the one hand, and the time-varying macroeconomic conditions in the economy on the other. We allow for contemporaneous calendar time effects acting on the exit probabilities for all currently unemployed. Also, we allow for cohort effects on the exit probabilities by allowing the composition of the inflow into unemployment to depend on calendar time. In both cases we distinguish between business cycle effects and seasonal effects. The model is estimated with aggregate unemployment duration data, in which we allow for unobserved heterogeneity and correlated measurement errors. The results enable us to give a complete decomposition of the dynamics of unemployment over calendar time.
JEL Classification: C41, E32, J64
Suggested Citation: Suggested Citation