Working Paper: NBER ID: w15030
Authors: Mark Bils; Yongsung Chang; Sunbin Kim
Abstract: We model unemployment allowing workers to differ by comparative advantage in market work. Workers with comparative advantage are identified by who works more hours when employed. This enables us to test the model by grouping workers based on their long-term wages and hours from panel data. The model captures the greater cyclicality of employment for workers with low comparative advantage. But the model fails to explain the magnitude of countercyclical separations for high-wage workers or the magnitude of procyclical findings for high-hours workers. As a result, it only captures the cyclicality of the extensive, employment margin for low-wage, low-hours workers.
Keywords: Unemployment; Comparative Advantage; Labor Market; Cyclical Fluctuations
JEL Codes: E24; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low comparative advantage among workers (F16) | higher separation rates (J63) |
| low comparative advantage among workers (F16) | lower job finding rates (J68) |
| higher separation rates (J63) | increased unemployment durations (J64) |
| low comparative advantage (F11) | lower rents from employment (R21) |
| lower rents from employment (R21) | lower rates of vacancy posting (J63) |
| separations during recessions (J65) | shift towards low-hours workers (J29) |
| higher-wage workers (J39) | countercyclical separations (E32) |
| high-hours workers (J29) | cyclicality of finding rate (E32) |