Some Like it Hot: Assessing Longer-Term Labor Market Benefits from a High-Pressure Economy
50 Pages Posted: 1 Feb 2018 Last revised: 21 Feb 2019
Date Written: 2018-06-01
This paper explores evidence for positive hysteresis in the labor market. Using data from the National Longitudinal Surveys of Youth, we find that negative labor market outcomes during high unemployment periods are mitigated by exposure to a high-pressure economy during the preceding expansion. Breaking total exposure into intensity and duration suggests that these two dimensions have differing impacts. However, the benefits of exposure are not enough to overcome the greater negative impact of high unemployment periods on labor market outcomes of disadvantaged groups, making extension of high-pressure economic environments efficacious in reducing labor market gaps.
Keywords: hysteresis, unemployment, labor market gaps, labor force participation, wage gaps
JEL Classification: E24, E60, J31, J64
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