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The ins and outs of unemployment over different time horizons

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  • Ajax Moreira

    (IPEA)

  • Miguel N. Foguel

    (IPEA)

  • Carlos Henrique Corseuil

    (IPEA)

Abstract

We devise a decomposition for the level of the unemployment rate that allows the assessment of the contributions of the various flow rates in the labor market over different time horizons. In particular, the decomposition allows one to recover the contributions of the flow rates in the long-run projection of the unemployment rate as in the steady-state decomposition widely used in the literature. We apply our methodology for data from the USA and Brazil. The results show that the relative contribution of the flows to the variance of the cyclical component of unemployment is sensitive to the time horizon of the projected unemployment rate. The changes in relative contributions of some flows are so prominent that their rankings change over time. These qualitative changes are more significant for Brazil than for the USA. Our results also evince that the steady-state approximation of the unemployment rate performs relatively worse in the former country. We take these findings as supporting evidence for considering the use of projected unemployment rate over shorter time horizons as an alternative to the steady-state approximation.

Suggested Citation

  • Ajax Moreira & Miguel N. Foguel & Carlos Henrique Corseuil, 2021. "The ins and outs of unemployment over different time horizons," Empirical Economics, Springer, vol. 60(5), pages 2533-2556, May.
  • Handle: RePEc:spr:empeco:v:60:y:2021:i:5:d:10.1007_s00181-020-01845-z
    DOI: 10.1007/s00181-020-01845-z
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    References listed on IDEAS

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    Cited by:

    1. Albertini Julien & Poirier Arthur & Sopraseuth Thepthida, 2020. "Informal work along the business cycle: evidence from Argentina," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-16, January.

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    More about this item

    Keywords

    Unemployment; Labor market flows; Cyclical fluctuations; Decomposition;
    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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