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What is behind the rise in long-term unemployment?

  • Daniel Aaronson
  • Bhashkar Mazumder
  • Shani Schechter

This article analyzes what is behind the recent unprecedented rise in long-term unemployment and explains what this rise might imply for the economy going forward. In particular, the authors attribute the sharp increase in unemployment duration in 2009 to especially weak labor demand and, to a lesser degree, extensions in unemployment insurance benefits.

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File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2010/2qtr2010_part1_aaronson_mazumder_schechter.pdf
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Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

Volume (Year): (2010)
Issue (Month): Q II ()
Pages: 28-51

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Handle: RePEc:fip:fedhep:y:2010:i:qii:p:28-51:n:v.34no.2
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  1. David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
  2. Kenneth A. Couch & Dana W. Placzek, 2010. "Earnings Losses of Displaced Workers Revisited," American Economic Review, American Economic Association, vol. 100(1), pages 572-89, March.
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  5. 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.
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  7. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
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  9. Rob Valletta & Aisling Cleary, 2008. "Sectoral reallocation and unemployment," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct17.
  10. Blanchard, O.J. & Diamond, P., 1990. "Ranking, Unemployment Duration, And Wages," Working papers 546, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
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  14. Daniel Aaronson & Scott Brave, 2009. "How does labor adjustment in this recession compare with the past?," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Jun.
  15. Ham, John C & Rea, Samuel A, Jr, 1987. "Unemployment Insurance and Male Unemployment Duration in Canada," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 325-53, July.
  16. Raj Chetty, 2008. "Erratum: Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1197-1197, December.
  17. Bhashkar Mazumder, 2007. "New evidence on labor market dynamics over the business cycle," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 36-46.
  18. Toshihiko Mukoyama & Aysegul Sahin & Anthony A. Smith Jr. & Per Krusell, 2008. "Revisiting the Welfare Effects of Eliminating Business Cycles: The case of short-term and long-term unemployment," 2008 Meeting Papers 435, Society for Economic Dynamics.
  19. Eichengreen, Barry & Hatton, Tim, 1988. "Interwar Unemployment in International Perspective," Institute for Research on Labor and Employment, Working Paper Series qt7bw188gk, Institute of Industrial Relations, UC Berkeley.
  20. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  21. Ellen R. Rissman, 2009. "Employment growth: cyclical movements or structural change?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 40-57.
  22. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  23. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  24. Daniel Aaronson & Ellen Rissman & Daniel G. Sullivan, 2004. "Can sectoral reallocation explain the jobless recovery?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 36-39.
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