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Macroeconomic shocks and the probability of being employed

  • Kornstad, Tom
  • Nymoen, Ragnar
  • Skjerpen, Terje

Macroeconomic theories take polar views on the importance of choice versus chance. At the micro level, it seems realistic to assume that both dimensions play a role for individual employment outcomes, although it might be difficult to separate these two effects. Nevertheless the choice and chance dimension are seldom treated symmetrically in models that use micro data. We estimate a logistic model of the probability of being employed among married or cohabitating women that are in the labor force. Besides variables that measure individual characteristics (choice), we allow a full set of indicator variables for observation periods that represent potential effects of aggregate shocks (chance) on job probabilities. To reduce the number of redundant indicator variables automatic model selection is used, and we assess the economic interpretation of the statistically significant indicator variables with reference to a theoretical framework that allows for friction in the Norwegian labor market. In addition, we also estimate models that use female and male unemployment rates as ‘sufficient’ variables for the chance element in individual employment outcomes. Data are for Norway for the period 1988q2–2008q4.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 33 (2013)
Issue (Month): C ()
Pages: 572-587

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Handle: RePEc:eee:ecmode:v:33:y:2013:i:c:p:572-587
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Lovell, Michael C, 1983. "Data Mining," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 1-12, February.
  2. Hendry, David F & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Royal Economic Society Annual Conference 2003 105, Royal Economic Society.
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  8. John K. Dagsvik & Tom Kornstad & Terje Skjerpen, 2010. "Labor force participation and the discouraged worker effect," Discussion Papers 642, Research Department of Statistics Norway.
  9. Per Krusell & Toshihiko Mukoyama & Richard Rogerson & Aysegul Sahin, 2009. "Aggregate Labor Market Outcomes: The Role of Choice and Chance," NBER Working Papers 15252, National Bureau of Economic Research, Inc.
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