The Ins and Outs of Unemployment: the Ins Win

51 Pages Posted: 16 Jul 2004

See all articles by Michael R. Darby

Michael R. Darby

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area; National Bureau of Economic Research (NBER)

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Mark W. Plant

National Bureau of Economic Research (NBER)

Date Written: August 1986

Abstract

This paper develops a framework for analyzing unemployment in terms ofvariations in the nt.imber and distribution of people becoming unemployed and inindividual probabilities of leaving unemployment. Contrary to the emphasis onexit probabilities in the recent macroeconomics literature, we presentempirical evidence in support of the proposition that changes in the size anddistribution of the inflow Into unemployment are the primary determinant ofthe unemployment rate. Instead of falling at the beginning of a recession,the outflow rate rises (with a lag) in response to the increased inflows whichdrive the recession. In contrast to normal unemployment, cyclical unemploymentis concentrated in groups with low normal exit probabilities; so theobserved procyclical variation in the average exit probability may largely heexplained by predictable distributional effects.

Suggested Citation

Darby, Michael R. and Haltiwanger, John C. and Plant, Mark W., The Ins and Outs of Unemployment: the Ins Win (August 1986). NBER Working Paper No. w1997. Available at SSRN: https://ssrn.com/abstract=227082

Michael R. Darby (Contact Author)

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area ( email )

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John C. Haltiwanger

University of Maryland - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Institute for the Study of Labor (IZA) ( email )

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Germany

Mark W. Plant

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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