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

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Abstract

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.

Suggested Citation

  • Andreas Hornstein & Thomas A. Lubik, 2015. "The Rise in Long-Term Unemployment: Potential Causes and Implications," Economic Quarterly, Federal Reserve Bank of Richmond, issue 2Q, pages 125-149.
    • Handle: RePEc:fip:fedreq:00032
    DOI: 10.21144/eq1010203
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    File URL: https://www.richmondfed.org/-/media/richmondfedorg/publications/research/economic_quarterly/2015/q2/2010.pdf
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    References listed on IDEAS

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    1. 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.
    2. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 417-434.
    3. Jeffrey M. Lacker & John A. Weinberg, 2007. "Inflation and unemployment: a layperson's guide to the Phillips curve," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 93(Sum), pages 201-227.
    4. Daniel Aaronson & Bhashkar Mazumder & Shani Schechter, 2010. "What is behind the rise in long-term unemployment?," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 34(Q II), pages 28-51.
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    Cited by:

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