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The Ins and Outs of Unemployment: The Ins Win

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  • Michael R. Darby

    (UCLA)

  • John C. Haltiwanger

    (UCLA)

  • Mark W. Plant

    (UCLA)

Abstract

This paper develops a framework for analyzing unemployment in terms of variations in the nt.imber and distribution of people becoming unemployed and in individual probabilities of leaving unemployment. Contrary to the emphasis on exit probabilities in the recent macroeconomics literature, we present empirical evidence in support of the proposition that changes in the size and distribution of the inflow Into unemployment are the primary determinant of the unemployment rate. Instead of falling at the beginning of a recession, the outflow rate rises (with a lag) in response to the increased inflows which drive the recession. In contrast to normal unemployment, cyclical unemployment is concentrated in groups with low normal exit probabilities; so the observed procyclical variation in the average exit probability may largely he explained by predictable distributional effects.

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Bibliographic Info

Paper provided by UCLA Department of Economics in its series UCLA Economics Working Papers with number 411.

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Date of creation: 01 Jun 1986
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Handle: RePEc:cla:uclawp:411

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Web page: http://www.econ.ucla.edu/

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  1. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 3(3), pages 254-83, June.
  2. Blinder, Alan S. & Fischer, Stanley, 1981. "Inventories, rational expectations, and the business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 8(3), pages 277-304.
  3. Grossman, Sanford J & Hart, Oliver D, 1983. "Implicit Contracts under Asymmetric Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(3), pages 123-56, Supplemen.
  4. John Haltiwanger, 1985. "Inventories, Multiperiod Implicit Contracts, and the Dynamic Behavior if the Firm Under Uncertainty," UCLA Economics Working Papers, UCLA Department of Economics 374, UCLA Department of Economics.
  5. Michael R. Darby & John Haltiwanger & Mark Plant, 1984. "Unemployment-Rate Dynamics and Persistent Unemployment Under RAtional Expectations," UCLA Economics Working Papers, UCLA Department of Economics 339, UCLA Department of Economics.
  6. Heckman, James J & Borjas, George J, 1980. "Does Unemployment Cause Future Unemployment? Definitions, Questions and Answers from a Continuous Time Model of Heterogeneity and State Dependence," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 47(187), pages 247-83, August.
  7. Topel, Robert H, 1982. "Inventories, Layoffs, and the Short-Run Demand for Labor," American Economic Review, American Economic Association, vol. 72(4), pages 769-87, September.
  8. James M. Poterba & Lawrence H. Summers, 1984. "Adjusting the Gross Changes Data: Implications for Labor Market Dynamics," Working papers 351, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Lilien, David M, 1982. "Sectoral Shifts and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(4), pages 777-93, August.
  10. Burdett, Kenneth & Ondrich, Jan I, 1985. "How Changes in Labor Demand Affect Unemployed Workers," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 3(1), pages 1-10, January.
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Citations

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Cited by:
  1. Refik Erzan & Alpay Filiztekin & Unal Zenginobuz, 2007. "Turkey's Customs Union with the European Union: A Framework for Evaluating the Impact of Economic Integration," Working Papers 2007/15, Bogazici University, Department of Economics.
  2. Daly, Mary C. & Hobijn, Bart & Valletta, Robert G., 2011. "The Recent Evolution of the Natural Rate of Unemployment," IZA Discussion Papers 5832, Institute for the Study of Labor (IZA).
  3. Barnichon, Regis, 2012. "Vacancy posting, job separation and unemployment fluctuations," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(3), pages 315-330.
  4. Mustapha Kamel Nabli & Marie-Ange Veganzones-Varoudakis, 2004. "How does exchange rate policy affect manufactured exports in MENA countries?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(19), pages 2209-2219.
  5. Michael Elsby & Bart Hobijn & Aysegul Sahin, 2008. "Unemployment Dynamics in the OECD," NBER Working Papers 14617, National Bureau of Economic Research, Inc.
  6. Mary Daly & Bart Hobijn & Aysegul Sahin & Robert Valletta, 2011. "A Rising Natural Rate of Unemployment: Transitory or Permanent?," Tinbergen Institute Discussion Papers 11-160/3, Tinbergen Institute.
  7. Mary C. Daly & Bart Hobijn & Aysegül Sahin & Robert G. Valletta, 2012. "A Search and Matching Approach to Labor Markets: Did the Natural Rate of Unemployment Rise?," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 3-26, Summer.
  8. Immo Schott, 2013. "Startups, Credit, and the Jobless Recovery," 2013 Meeting Papers, Society for Economic Dynamics 340, Society for Economic Dynamics.
  9. Murat Tasci, 2010. "The ins and outs of unemployment in the long run: a new estimate for the natural rate?," Working Paper 1017, Federal Reserve Bank of Cleveland.
  10. Paweł Strawiński, 2009. "Ins and Outs of Polish Unemployment," Central European Journal of Economic Modelling and Econometrics, CEJEME, CEJEME, vol. 1(3), pages 243-259, November.
  11. Bachmann, Ronald & David, Peggy, 2009. "The importance of two-sided heterogeneity for the cyclicality of labour market dynamics," Technical Reports 2009,05, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
  12. Fabio Canova & David Lopez-Salido & Claudio Michelacci, 2009. "The ins and outs of unemployment: An analysis conditional on technology shocks," Economics Working Papers 1213, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2012.
  13. Mary Daly & Bart Hobijn & Aysegul Sahin & Robert Valletta, 2011. "A Rising Natural Rate of Unemployment: Transitory or Permanent?," Tinbergen Institute Discussion Papers 11-160/3, Tinbergen Institute.
  14. Bellmann, Lutz & Gerner, Hans-Dieter & Upward, Richard, 2011. "Job and Worker Turnover in German Establishments," IZA Discussion Papers 6081, Institute for the Study of Labor (IZA).
  15. Ignez M. Tristao, 2007. "Occupational Employment Risk and its Consequences for Unemployment Duration and Wages: Working Paper 2007-01," Working Papers, Congressional Budget Office 18287, Congressional Budget Office.

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