Working Paper: CEPR ID: DP1702
Authors: Jaap H. Abbring; Gerard J. van den Berg; Jan C. van Ours
Abstract: In the past decades several features of US unemployment dynamics have been investigated empirically. The original focus of research was on the duration of unemployment. In later studies the cyclicality of incidence and duration, compositional effects and duration dependence of the exit rate out of unemployment have been investigated. Unlike the partial approach of previous studies this paper takes all elements of unemployment dynamics simultaneously into account. We find that cyclical fluctuations in unemployment are driven by variations in the incidence, individual exit probabilities and the composition of the inflow into unemployment. We also find negative duration dependence of the unemployment exit rate, which can be attributed to employers ranking workers according to the length of their unemployment spell.
Keywords: unemployment; composition; unemployment duration; business cycle; sorting; ranking
JEL Codes: C41; E32; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cyclical fluctuations in unemployment (J64) | variations in incidence (I12) |
| cyclical fluctuations in unemployment (J64) | individual exit probabilities (C29) |
| individual exit probabilities (C29) | unemployment duration (J64) |
| duration of unemployment (J64) | exit probabilities (C62) |
| incidence of unemployment (J64) | cyclical fluctuations in unemployment (J64) |
| composition of inflow into unemployment (J65) | unemployment duration (J64) |
| economic expansions (E32) | quality of inflow into unemployment (J68) |