Individuals' Unemployment Durations Over the Business Cycle
25 Pages Posted: 27 Sep 2001
Date Written: September 2001
Abstract
Using a large panel of administrative records this study confirms the predictions of the ranking model of Blanchard and Diamond (1994) that an individual's probability of leaving unemployment decreases with unemployment duration and increases with economic growth. However, the ranking model of Blanchard and Diamond (1994) makes the further prediction that negative genuine duration dependence will be stronger the more depressed the labor market. In conflict with this prediction this study provides persuasive empirical evidence that the pattern of negative genuine duration dependence does not change over the business cycle. Moreover it is shown that the finding in previous studies that negative genuine duration dependence becomes stronger the more depressed the labor market arises from failure to control for cyclical fluctuations in the composition of the newly unemployed. This finding carries a strong warning for policy assessment: unless controlled for cyclical fluctuations in the composition of the newly unemployed an evaluation of a policy designed to get the long-term unemployed into work will be biased towards a success in times of high economic growth and towards a failure in times of low economic growth.
Keywords: Unemployment, Duration Model, Business Cycles
JEL Classification: J64, C41, E32
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Anatomy of Unemployment Dynamics
By Jaap H. Abbring, Gerard J. Van Den Berg, ...
-
Business Cycles and Compositional Variation in U.S. Unemployment
By Jaap H. Abbring, Gerard J. Van Den Berg, ...
-
People I Know: Job Search and Social Networks
By Federico Cingano and Alfonso Rosolia
-
Duration Dependence in the Exit Rate Out of Unemployment in Belgium: Is it True or Spurious?
By Bart Cockx and Muriel Dejemeppe
-
Social Networks and Labor Market Transitions
By Yann Bramoulle and Gilles Saint-paul
-
Social Networks and Labor Market Transitions
By Yann Bramoulle and Gilles Saint-paul
-
Choice and Success of Job Search Methods
By Andrea Weber and Helmut Mahringer
-
Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany
By Marco Caliendo, Ricarda Schmidl, ...
-
Social Networks, Job Search Methods and Reservation Wages: Evidence for Germany
By Marco Caliendo, Ricarda Schmidl, ...