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Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment

43 Pages Posted: 4 Jun 2013  

Kory Kroft

University of Toronto

Fabian Lange

McGill University

Matthew Notowidigdo

University of Chicago - Booth School of Business

Date Written: March 1, 2013

Abstract

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.

JEL Classification: J64

Suggested Citation

Kroft, Kory and Lange, Fabian and Notowidigdo, Matthew, Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment (March 1, 2013). Chicago Booth Research Paper No. 13-56. Available at SSRN: https://ssrn.com/abstract=2273652 or http://dx.doi.org/10.2139/ssrn.2273652

Kory Kroft

University of Toronto ( email )

Department of Statistical Sciences
Toronto, Ontario M5S 3G8
Canada

Fabian Lange

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Matthew Notowidigdo (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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