The Rise in Long-Term Unemployment: Potential Causes and Implications

25 Pages Posted: 31 Mar 2016

See all articles by Andreas Hornstein

Andreas Hornstein

Federal Reserve Bank of Richmond

Thomas Lubik

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 2015

Abstract

Long-term unemployment rose dramatically during the recent recession and remains elevated. In this essay, Andreas Hornstein and Thomas A. Lubik analyze the potential causes of this increase and explore various explanations of “duration dependence,” the fact that the likelihood of finding a job decreases the longer a worker is unemployed. The authors find that more workers with inherently low job finding rates have become unemployed, which suggests that monetary policy may have a limited effect on reducing the incidence of long-term unemployment. The authors also discuss what lessons might be drawn from policy responses to long-term unemployment in Europe.

Suggested Citation

Hornstein, Andreas and Lubik, Thomas, The Rise in Long-Term Unemployment: Potential Causes and Implications (2015). Economic Quarterly, Issue 2Q, pp. 125-149, 2015. Available at SSRN: https://ssrn.com/abstract=2756948 or http://dx.doi.org/10.21144/eq1010203

Andreas Hornstein (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8266 (Phone)
804-697-8255 (Fax)

Thomas Lubik

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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