Duration Dependence and Composition in Unemployment Spells

14 Pages Posted: 7 Dec 2016 Last revised: 17 Jul 2019

See all articles by James Eubanks

James Eubanks

Federal Reserve Banks - Federal Reserve Bank of St. Louis

David G. Wiczer

SUNY Stony Brook - Department of Economics

Date Written: 2016

Abstract

This article reviews the evidence for duration dependence in job-finding rates and its implications for the unemployment duration distribution. The authors document duration dependence and show that it exists within nearly every demographic subgroup. Then, they examine the implications of duration dependence on unemployment duration, emphasizing that a uniform job-finding rate that does not incorporate duration dependence understates unemployment duration. Finally, they explore a composition-based approach to duration dependence, where they solve for the distribution of preexisting heterogeneity that is consistent with observed duration dependence. The authors look at how this distribution varies cyclically and, in particular, during the Great Recession. The largest changes occur at the low finding-rate tail of this distribution.

JEL Classification: E24, J14

Suggested Citation

Eubanks, James and Wiczer, David G., Duration Dependence and Composition in Unemployment Spells (2016). Review, Vol. 98, Issue 4, pp. 263-276, 2016. Available at SSRN: https://ssrn.com/abstract=2881845 or http://dx.doi.org/10.20955/r.2016.263-276

James Eubanks (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States

David G. Wiczer

SUNY Stony Brook - Department of Economics ( email )

NY 11733-4384
United States

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