The Rise in Long-Term Unemployment: Potential Causes and Implications
25 Pages Posted: 31 Mar 2016
Date Written: 2015
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.
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