Has the Great Recession Raised U.S. Structural Unemployment?

47 Pages Posted: 20 May 2011

See all articles by Marcello M. Estevão

Marcello M. Estevão

International Monetary Fund (IMF) - Western Hemisphere Department

Evridiki Tsounta

International Monetary Fund (IMF) - Western Hemisphere Department

Date Written: May 2011

Abstract

The recent crisis has had differential effects across U.S. states and industries causing a wide geographic dispersion in skill mismatches and housing market performance. We document these facts and, using data from the 50 states plus D.C from 1991 to 2008, we present econometric evidence that supports that changes in state-level unemployment rates are linked to skill mismatches and housing market performance even after controlling for cyclical effects. This result suggests some causality going from mismatches and housing conditions to unemployment rates. The numerical estimates imply that the structural unemployment rate in 2010 was about 1¾ percentage points higher than before the onset of the housing market meltdown at end-2006. Reversing this increase may require targeted active labor market policies and measures to expedite the adjustment in housing markets, as our results suggest weak housing market conditions interact negatively with skill mismatches to produce higher unemployment rates in the United States.

Suggested Citation

Estevao, Marcello M. and Tsounta, Evridiki, Has the Great Recession Raised U.S. Structural Unemployment? (May 2011). IMF Working Paper No. 11/105, Available at SSRN: https://ssrn.com/abstract=1847338

Marcello M. Estevao (Contact Author)

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th St., NW
HQ1-10-115
Washington, DC 20431
United States
202-623-6038 (Phone)
202-589-6038 (Fax)

Evridiki Tsounta

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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