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Duration structure of unemployment hazards and the trend unemployment rate

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  • Ahn, Hie Joo

Abstract

This paper develops a new method to estimate the trend unemployment rate in which the duration profile of unemployment hazards is taken into account. The duration profile is characterized by three time-varying elements—level, slope, and curvature. The model also recovers the duration component of trend unemployment rate and the trend mean duration of unemployment. The estimated trend unemployment rate declines by about 3 percentage points between 1980 and 2019. Its short-term duration component decreases, whereas the long-term component increases, resulting in a rise in the trend mean duration of unemployment. The opposite trends in duration components suggest falling frictional unemployment but rising structural unemployment.

Suggested Citation

  • Ahn, Hie Joo, 2023. "Duration structure of unemployment hazards and the trend unemployment rate," Journal of Economic Dynamics and Control, Elsevier, vol. 151(C).
    • Handle: RePEc:eee:dyncon:v:151:y:2023:i:c:s0165188923000702
    DOI: 10.1016/j.jedc.2023.104664
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    References listed on IDEAS

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    More about this item

    Keywords

    Trend unemployment rate; Unemployment duration; Duration dependence; Trend-cycle decomposition; Nonlinear state space model; Extended Kalman filter; Nelson–Siegel model;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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