Jobless Recoveries and Time Variation in Labor Markets

54 Pages Posted: 21 Nov 2023

See all articles by Irina Panovska

Irina Panovska

University of Texas at Dallas

Licheng Zhang

Southern University of Science and Technology

Date Written: October 24, 2023

Abstract

This paper studies the nature of time-variation in the relationship between labor market variables and output. Using a flexible time-varying-parameter vector autoregression model with stochastic volatility, we study changes in the relationship between output and different labor market variables. We find heterogeneity both in the timing and the type of changes. The responses of employment to output became weaker over time, primarily driven by the abrupt decline in economic volatility 1984-2007. On the other hand, the time-variability in the response of unemployment is primarily concentrated during periods of high volatility. Much more notably, the responses of hours and part-time employment to output have become stronger over time, and this relationship evolved gradually over time, indicating a shift towards utilization of the intensive margin and utilization of more flexible labor inputs.

Keywords: business cycles, employment, time-varying vector autoregression, jobless recovery

JEL Classification: E24, E32

Suggested Citation

Panovska, Irina and Zhang, Licheng, Jobless Recoveries and Time Variation in Labor Markets (October 24, 2023). Available at SSRN: https://ssrn.com/abstract=4611736 or http://dx.doi.org/10.2139/ssrn.4611736

Irina Panovska (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Licheng Zhang

Southern University of Science and Technology ( email )

No 1088, xueyuan Rd.
Xili, Nanshan District
Shenzhen, Guangdong 518055
China

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