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What is behind the rise in long-term unemployment?

Listed author(s):
  • 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. 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.
  2. Chatterjee, Satyajit & Corbae, Dean, 2007. "On the aggregate welfare cost of Great Depression unemployment," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1529-1544, September.
  3. 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 325-353, July.
  4. Gary Solon & Ryan Michaels & Michael W. L. Elsby, 2009. "The Ins and Outs of Cyclical Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 84-110, January.
  5. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, 04.
  6. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
  7. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 417-434.
  8. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  9. Kenneth A. Couch & Dana W. Placzek, 2010. "Earnings Losses of Displaced Workers Revisited," American Economic Review, American Economic Association, vol. 100(1), pages 572-589, March.
  10. Daniel Aaronson & Ellen R. 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.
  11. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
  12. Philip Oreopoulos & Marianne Page & Ann Huff Stevens, 2008. "The Intergenerational Effects of Worker Displacement," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 455-483, 07.
  13. 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.
  14. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, 04.
  15. Ellen R. Rissman, 2009. "Employment growth: cyclical movements or structural change?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 40-57.
  16. 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.
  17. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  18. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
  19. Robert G. Valletta & Aisling Cleary, 2008. "Sectoral reallocation and unemployment," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue oct17.
  20. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-677, October.
  21. 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.
  22. Bruce C. Fallick, 1996. "A Review of the Recent Empirical Literature on Displaced Workers," ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  23. 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.
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