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U.S. Unemployment Duration: Has Long Become Longer or Short Become Shorter?

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  • Pedro Portugal

Abstract

The U.S. labor market has been experiencing unprecedented high average unemployment duration. The shift in the unemployment duration distribution can be traced back to the early nineties. In this study, censored quantile regression methods are employed to analyze the changes in the U.S. unemployment duration distribution. We explore the decomposition method proposed by Machado and Mata (2005) to disentangle the contribution of the changes generated by the covariate distribution and by the conditional distribution. The data used in this inquiry are taken from the nationally representative Displaced Worker Surveys of 1988 and 1998. We provide evidence that the change in the unemployment duration distribution is mainly produced by the opposing effects of a sharp rise in job-to-job transition rates and an increased sensitivity of unemployment duration to unemployment rates. Compositional changes in the labor force played a limited role. We rationalize our findings by arguing that improved screening technology is likely to be the relevant underlying mechanism at work.

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Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2007/17.

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Date of creation: Dec 2007
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Handle: RePEc:cnb:wpaper:2007/17

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Keywords: Quantile Regression; Duration Analysis; Unemployment Duration; Counterfactual Decomposition.;

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References

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  1. John T. Addison & McKinley L. Blackburn, 1994. "The Worker Adjustment and Retraining Notification Act," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 181-190, Winter.
  2. Kuhn, Peter J. & Skuterud, Mikal, 2002. "Internet Job Search and Unemployment Durations," IZA Discussion Papers 613, Institute for the Study of Labor (IZA).
  3. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
  4. William J. Baumol & Edward N. Wolff, 1998. "Speed of Technical Progress and Length of the Average Interjob Period," Economics Working Paper Archive wp_237, Levy Economics Institute.
  5. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc.
  6. Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
  7. David H. Autor, 2000. "Why Do Temporary Help Firms Provide Free General Skills Training?," NBER Working Papers 7637, National Bureau of Economic Research, Inc.
  8. Mukoyama, Toshihiko & Sahin, Aysegl, 2009. "Why did the average duration of unemployment become so much longer?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 200-209, March.
  9. John T. Addison & Pedro Portugal, 1992. "Advance notice and unemployment: New evidence from the 1988 Displaced Worker Survey," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(4), pages 645-664, July.
  10. Susan N. Houseman, 2001. "Why employers use flexible staffing arrangements: Evidence from an establishment survey," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 149-170, October.
  11. Bassett, Gilbert W. & Koenker, Roger W., 1986. "Strong Consistency of Regression Quantiles and Related Empirical Processes," Econometric Theory, Cambridge University Press, vol. 2(02), pages 191-201, August.
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  13. Oliver Jean Blanchard & Peter Diamond, 1990. "The Cyclical Behovior of the Gross Flows of U.S. Workers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 85-156.
  14. Robert E. Hall, 2005. "Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years," NBER Working Papers 11678, National Bureau of Economic Research, Inc.
  15. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  16. Addison, John T & Portugal, Pedro, 1987. "On the Distributional Shape of Unemployment Duration," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 521-26, August.
  17. Chinhui Juhn & Kevin Murphy & Robert Topel, 2002. "Current Unemployment, Historically Contemplated," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 79-136.
  18. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521608275.
  19. Mark C. Berger & Dan Black & Jeffrey Smith, 2000. "Evaluating Profiling as a Means of Allocating Government Services," UWO Department of Economics Working Papers 200018, University of Western Ontario, Department of Economics.
  20. Lawrence Katz & Alan Krueger, 1999. "The High-pressure U.S. Labor Market of the 1990s," Working Papers 795, Princeton University, Department of Economics, Industrial Relations Section..
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  23. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  24. Bruce Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.).
  25. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
  26. David H. Autor & David Scarborough, 2004. "Will Job Testing Harm Minority Workers?," NBER Working Papers 10763, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Mukoyama, Toshihiko & Sahin, Aysegl, 2009. "Why did the average duration of unemployment become so much longer?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 200-209, March.
  2. Bachmann, Ronald & Sinning, Mathias, 2012. "Decomposing the Ins and Outs of Cyclical Unemployment," IZA Discussion Papers 6362, Institute for the Study of Labor (IZA).
  3. Fitzenberger, Bernd & Wilke, Ralf A., 2007. "New insights on unemployment duration and post unemployment earnings in Germany: censored Box-Cox quantile regression at work," ZEW Discussion Papers 07-007, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Rubiana Chamarbagwala, 2010. "Economic liberalization and urban–rural inequality in India: a quantile regression analysis," Empirical Economics, Springer, vol. 39(2), pages 371-394, October.
  5. Josep Pijoan-Mas & Hernan Ruffo & Claudio Michelacci, 2012. "Inequality in Unemployment Risk and in Wages," 2012 Meeting Papers 794, Society for Economic Dynamics.
  6. Philip Ball & Ralf Wilke, . "Job seeker's allowance in Great Britain: How does the regional labour market affect the duration until job finding?," Discussion Papers 09/03, University of Nottingham, School of Economics.

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