Re-Employment Probabilities Over the Business Cycle

46 Pages Posted: 11 Jul 2007 Last revised: 14 Jul 2021

See all articles by Guido W. Imbens

Guido W. Imbens

Stanford Graduate School of Business

Lisa M. Lynch

Tufts University - The Fletcher School of Law and Diplomacy; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 1993

Abstract

Using a Cox proportional hazard model that allows for a flexible time dependence that can incorporate both seasonal and business cycle effects, we analyze the determinants of re-employment probabilities of young workers from 1978-1989. We find considerable changes in the chances of young workers finding jobs over the business cycle, however, the characteristics of those starting jobless spells do not vary much over time. Therefore, government programs that target specific demographic groups may change individuals' positions within the queue of job seekers but will probably have a more limited impact on the overall re-employment probability. Living in an area with high local unemployment reduces re-employment chances as does being in a long spell of non-employment. However, when we allow for an interaction between the length of time of a jobless spell and the local unemployment rate we find the interaction term is positive. In other words, while workers appear to be scarred by a long spell of unemployment, the damage seems to be reduced if they are unemployed in an area with high overall unemployment.

Suggested Citation

Imbens, Guido W. and Lynch, Lisa M., Re-Employment Probabilities Over the Business Cycle (December 1993). NBER Working Paper No. w4585, Available at SSRN: https://ssrn.com/abstract=484030

Guido W. Imbens (Contact Author)

Stanford Graduate School of Business ( email )

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Lisa M. Lynch

Tufts University - The Fletcher School of Law and Diplomacy ( email )

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