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The Ins and Outs of Unemployment: The Ins Win

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  • Michael R. Darby
  • John C. Haltiwanger
  • Mark W. Plant

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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1997.

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Date of creation: Aug 1986
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Handle: RePEc:nbr:nberwo:1997

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Michael R. Darby & John C. Haltiwanger & Mark W. Plant, 1985. "Unemployment-Rate Dynamics and Persistent Unemployment Under Rational Expectations," NBER Working Papers 1558, National Bureau of Economic Research, Inc.
  6. James M. Poterba & Lawrence H. Summers, 1984. "Adjusting the Gross Changes Data: Implications for Labor Market Dynamics," NBER Working Papers 1436, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. 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.
  10. Topel, Robert H, 1982. "Inventories, Layoffs, and the Short-Run Demand for Labor," American Economic Review, American Economic Association, American Economic Association, vol. 72(4), pages 769-87, September.
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Citations

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Cited by:
  1. 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.
  2. 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, Bogazici University, Department of Economics 2007/15, Bogazici University, Department of Economics.
  3. 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.
  4. 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.
  5. Mary Daly & Bart Hobijn & Rob Valletta, 2011. "The recent evolution of the natural rate of unemployment," Working Paper Series, Federal Reserve Bank of San Francisco 2011-05, Federal Reserve Bank of San Francisco.
  6. 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.
  7. Bachmann, Ronald & David, Peggy, 2010. "The Importance of Two-Sided Heterogeneity for the Cyclicality of Labour Market Dynamics," IZA Discussion Papers 5358, Institute for the Study of Labor (IZA).
  8. 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.
  9. Immo Schott, 2013. "Startups, Credit, and the Jobless Recovery," 2013 Meeting Papers, Society for Economic Dynamics 340, Society for Economic Dynamics.
  10. Michael Elsby & Bart Hobijn & Aysegül Sahin, 2009. "Unemployment dynamics in the OECD," Working Paper Series, Federal Reserve Bank of San Francisco 2009-04, Federal Reserve Bank of San Francisco.
  11. Barnichon, Regis, 2012. "Vacancy posting, job separation and unemployment fluctuations," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(3), pages 315-330.
  12. Fabio Canova & David Lopez-Salido & Claudio Michelacci, 2009. "The ins and outs of unemployment: An analysis conditional on technology shocks," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1213, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2012.
  13. 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).
  14. repec:dgr:uvatin:2011160 is not listed on IDEAS
  15. 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, American Economic Association, vol. 26(3), pages 3-26, Summer.

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