Working Paper: NBER ID: w0979
Authors: Christopher J. Flinn; James J. Heckman
Abstract: This paper formulates and tests the hypothesis that the categories unemployed and out of the labor force are behaviorally distinct labor force states. Our empirical results indicate that they are. In the empirically relevant range the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment. This evidence is shown to be consistent with a simple job search model of productive unemployment with log concave wage offer distributions. We prove that if unemployed workers receive job offers more frequently than workers out of the labor force, and if wage offer distributions are log concave, the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment.
Keywords: labor force; unemployment; job search; youth unemployment
JEL Codes: J64; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exit rate from unemployment to employment (hue) (J60) | exit rate from out of the labor force to employment (ho) (J69) |
| unemployment (J64) | job offers (M51) |
| job offers (M51) | exit rate from unemployment to employment (hue) (J60) |
| unemployment (J64) | exit rate from out of the labor force to employment (ho) (J69) |
| out of the labor force (J22) | exit rate from out of the labor force to employment (ho) (J69) |