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The Rise in Long-Term Unemployment: Potential Causes and Implications

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Long-term unemployment rose dramatically during the recent recession and remains elevated. In this essay, Andreas Hornstein and Thomas A. Lubik analyze the potential causes of this increase and explore various explanations of “duration dependence,” the fact that the likelihood of finding a job decreases the longer a worker is unemployed. The authors find that more workers with inherently low job finding rates have become unemployed, which suggests that monetary policy may have a limited effect on reducing the incidence of long-term unemployment. The authors also discuss what lessons might be drawn from policy responses to long-term unemployment in Europe.

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File URL: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2015/q2/2010.pdf
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Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.

Volume (Year): (2015)
Issue (Month): 2Q ()
Pages: 125-149

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Handle: RePEc:fip:fedreq:00032
DOI: 10.21144/eq1010203
Contact details of provider: Web page: http://www.richmondfed.org/

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  1. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 417-434.
  2. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
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