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Unemployment and Nonemployment: Heterogeneities in Labor Market States

  • Stephen R. G. Jones
  • W. Craig Riddell

The determination of how to distinguish between unemployment and nonparticipation is important and controversial. The conventional approach employs a priori reasoning together with self-reported current behavior. This paper employs an evidence-based classification of labor force status using information about the consequences of the behavior of the nonemployed. We find that marginal attachment-defined as desiring work, although not searching-is a distinct labor market state, lying between those who do not desire work and the unemployed. Furthermore, important heterogeneities exist within these nonemployment states. Two subsets of nonparticipants-both engaged in waiting-display behavior similar to the unemployed. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 88 (2006)
Issue (Month): 2 (May)
Pages: 314-323

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Handle: RePEc:tpr:restat:v:88:y:2006:i:2:p:314-323
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  1. Coles, Melvyn & Petrongolo, Barbara, 2003. "A Test between Unemployment Theories Using Matching Data," IZA Discussion Papers 723, Institute for the Study of Labor (IZA).
  2. Olivier Jean Blanchard & Peter Diamond, 1992. "The Flow Approach to Labor Markets," NBER Working Papers 4000, National Bureau of Economic Research, Inc.
  3. Flinn, Christopher J & Heckman, James J, 1983. "Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 28-42, January.
  4. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
  5. Füsun Gönül, 1992. "New Evidence on Whether Unemployment and out of the Labor Force are Distinct States," Journal of Human Resources, University of Wisconsin Press, vol. 27(2), pages 329-361.
  6. Stephen R. G. Jones & W. Craig Riddell, 1999. "The Measurement of Unemployment: An Empirical Approach," Econometrica, Econometric Society, vol. 67(1), pages 147-162, January.
  7. Coles, Melvyn G & Smith, Eric, 1998. "Marketplaces and Matching," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 239-54, February.
  8. Stephen R. G. Jones & W. Craig Riddell, 1998. "Unemployment and Labor Force Attachment: A Multistate Analysis of Nonemployment," NBER Chapters, in: Labor Statistics Measurement Issues, pages 123-155 National Bureau of Economic Research, Inc.
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