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Duration Dependence and Labor Market Conditions: Theory and Evidence from a Field Experiment

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  • Kroft, Kory
  • Lange, Fabian
  • Notowidigdo, Matthew J.

Abstract

This paper studies the role of employer behavior in generating “negative duration dependence†– the adverse effect of a longer unemployment spell – by sending fictitious resumes to real job postings in 100 U.S. cities. Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker’s unemployment spell, with the majority of this decline occurring during the first eight months. We explore how this effect varies with local labor market conditions, and find that duration dependence is stronger when the labor market is tighter. We develop a theoretical framework that shows how the sign of this interaction effect can be used to discern among leading models of duration dependence based on employer screening, employer ranking, and human capital depreciation. Our results suggest that employer screening plays an important role in generating duration dependence; employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets.

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File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%20101%20-%20Kroft,%20Lange%20and%20Notowidigo.pdf
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Bibliographic Info

Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2012-21.

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Length: 61 pages
Date of creation: 28 Sep 2012
Date of revision: 28 Sep 2012
Handle: RePEc:ubc:clssrn:clsrn_admin-2012-21

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Web page: http://www.clsrn.econ.ubc.ca/

Related research

Keywords: Duration dependence; screening; business cycle; skill depreciation;

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References

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  15. Berg, G. van den & Ours, J.C. van, 1996. "Unemployment dynamics and duration dependence," Open Access publications from Tilburg University urn:nbn:nl:ui:12-86874, Tilburg University.
  16. Nicola Pavoni, 2009. "Optimal Unemployment Insurance, With Human Capital Depreciation, And Duration Dependence," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 323-362, 05.
  17. Acemoglu, Daron, 1995. "Public Policy in a Model of Long-Term Unemployment," Economica, London School of Economics and Political Science, vol. 62(246), pages 161-78, May.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Unemployment dynamics
    by James_Hamilton in Econbrowser on 2014-05-07 21:54:52
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Cited by:
  1. Marianna Kudlyak & Damba Lkhagvasuren & Roman Susuyev, 2012. "Sorting by Skill over the Course of Job Search," Working Papers 12011, Concordia University, Department of Economics, revised 18 Apr 2012.
  2. John M. Nunley & Adam Pugh & Nicholas Romero & Richard Alan Seals, Jr., 2014. "Unemployment, Underemployment, and Employment Opportunities: Results from a Correspondence Audit of the Labor Market for College Graduates," Auburn Economics Working Paper Series auwp2014-04, Department of Economics, Auburn University.
  3. John M. Nunley & Adam Pugh & Nicholas Romero & Richard Alan Seals, Jr., 2014. "College Major, Internship Experience, and Employment Opportunities: Estimates from a Résumé Audit," Auburn Economics Working Paper Series auwp2014-03, Department of Economics, Auburn University.
  4. Bennmarker, Helge & Nordström Skans, Oskar & Vikman, Ulrika, 2012. "Workfare for the old and long-term unemployed," Working Paper Series, Center for Labor Studies 2012:8, Uppsala University, Department of Economics.
  5. Faberman, R. Jason & Kudlyak, Marianna, 2014. "The Intensity of Job Search and Search Duration," Working Paper 14-12, Federal Reserve Bank of Richmond.
  6. Jon D. Wisman & Aaron Pacitti, 2013. "Ending the Crisis With Guaranteed Employment and Retraining," Working Papers 2013-12, American University, Department of Economics.
  7. Richard B. Freeman, 2013. "Failing the Test? The Flexible U.S. Job Market in the Great Recession," NBER Working Papers 19587, National Bureau of Economic Research, Inc.
  8. John M. Nunley & Adam Pugh & Nicholas Romero & Richard Alan Seals, Jr., 2014. "An Examination of Racial Discrimination in the Labor Market for Recent College Graduates: Estimates from the Field," Auburn Economics Working Paper Series auwp2014-06, Department of Economics, Auburn University.

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