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The Consequences of Long-Term Unemployment: Evidence from Linked Survey and Administrative Data

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  • Katharine G. Abraham
  • John Haltiwanger
  • Kristin Sandusky
  • James R. Spletzer

Abstract

That the long-term unemployed fare worse in the labor market than do the short-term unemployed is well-known, but why? One potential explanation is that the long-term unemployed are “bad apples†who had poorer prospects from the outset of their spells (heterogeneity). Another is that these bad outcomes are a consequence of their extended unemployment (state dependence). The authors use Current Population Survey data on unemployed individuals linked to unemployment insurance wage records for the same people to distinguish between these explanations. The rich work history information contained in the wage records allows the authors to control for individual heterogeneity that could affect post-unemployment labor market outcomes. Even with these controls in place, they find that unemployment duration has a strongly negative effect on the likelihood of subsequent employment. The results are robust to accounting for differences in the labor market conditions experienced by the long-term and short-term unemployed.

Suggested Citation

  • Katharine G. Abraham & John Haltiwanger & Kristin Sandusky & James R. Spletzer, 2019. "The Consequences of Long-Term Unemployment: Evidence from Linked Survey and Administrative Data," ILR Review, Cornell University, ILR School, vol. 72(2), pages 266-299, March.
  • Handle: RePEc:sae:ilrrev:v:72:y:2019:i:2:p:266-299
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    1. David G. Blanchflower & Alex Bryson, 2020. "Unemployment Disrupts Sleep," DoQSS Working Papers 20-13, Quantitative Social Science - UCL Social Research Institute, University College London.
    2. Lídia Farré & Francesco Fasani & Hannes Mueller, 2018. "Feeling useless: the effect of unemployment on mental health in the Great Recession," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-34, December.
    3. Samuel Bentolila & J. Ignacio García-Pérez & Marcel Jansen, 2017. "Are the Spanish long-term unemployed unemployable?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 8(1), pages 1-41, March.
    4. Schmidpeter, Bernhard & Winter-Ebmer, Rudolf, 2021. "Automation, unemployment, and the role of labor market training," European Economic Review, Elsevier, vol. 137(C).
    5. Nüß, Patrick, 2017. "Duration Dependence as an Unemployment Stigma: Evidence from a Field Experiment in Germany," GLO Discussion Paper Series 88, Global Labor Organization (GLO).
    6. B. Contini & J. Ignacio Garcia Perez & T. Pusch & R. Quaranta, 2017. "New Approaches to the Study of Long Term Non-Employment Duration in Italy, Germany and Spain," Working Papers 2017-14, FEDEA.
    7. Pavlina R. Tcherneva, 2017. "Unemployment: The Silent Epidemic," Economics Working Paper Archive wp_895, Levy Economics Institute.
    8. Amélie Barbier-Gauchard & Meixing Dai & Claire Mainguy & Jamel Saadaoui & Moïse Sidiropoulos & Isabelle Terraz & Jamel Trabelsi, 2021. "Towards a more resilient European Union after the COVID-19 crisis," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 321-348, June.
    9. Contini, Bruno & Quaranta, Roberto, 2017. "Explaining Non-Employment Magnitude and Duration: The Case of Italy," IZA Discussion Papers 10728, Institute of Labor Economics (IZA).
    10. O’Leary, Nigel & Li, Ian W. & Gupta, Prashant & Blackaby, David, 2020. "Wellbeing trajectories around life events in Australia," Economic Modelling, Elsevier, vol. 93(C), pages 499-509.
    11. Olivier Blanchard, 2018. "Should We Reject the Natural Rate Hypothesis?," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 97-120, Winter.
    12. Carola Conces Binder, 2021. "Central Bank Communication and Disagreement about the Natural Rate Hypothesis," International Journal of Central Banking, International Journal of Central Banking, vol. 17(2), pages 81-123, June.
    13. Blanchflower, David G. & Bryson, Alex, 2021. "Unemployment and sleep: evidence from the United States and Europe," Economics & Human Biology, Elsevier, vol. 43(C).
    14. Ioannis Kospentaris, 2021. "Unobserved Heterogeneity and Skill Loss in a Structural Model of Duration Dependence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 280-303, January.
    15. G Dosi & M C Pereira & A Roventini & M E Virgillito, 2018. "Causes and consequences of hysteresis: aggregate demand, productivity, and employment," Industrial and Corporate Change, Oxford University Press, vol. 27(6), pages 1015-1044.
    16. Olivier J. Blanchard, 2017. "Should we Get rid of the Natural Rate Hypothesis?," NBER Working Papers 24057, National Bureau of Economic Research, Inc.
    17. Anger, Silke & Camehl, Georg & Peter, Frauke, 2017. "Involuntary job loss and changes in personality traits," Journal of Economic Psychology, Elsevier, vol. 60(C), pages 71-91.

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    More about this item

    Keywords

    unemployment; employment; job search; longitudinal matched employer–employee data; non-employment spells; re-employment wages;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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