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New Evidence on Whether Unemployment and out of the Labor Force are Distinct States

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  • Füsun Gönül

Abstract

This paper focuses on the question of whether people who are out of the labor force (OLF) should be included in unemployment measures. If people who are OLF can obtain jobs as often as the people who are unemployed, then there is no real distinction between the two states of nonemployment. Surprisingly, there has been very little effort surrounding this issue in the past: Clark and Summers (1982) conclude that for teenagers, unemployment and OLF are not distinct states, while Flinn and Heckman (1982a) find the opposite for white male high school graduates. The methodology adopted in this paper enables one to use incomplete transition data on unemployment and OLF, and to obtain estimates of the full transition matrix between three labor force states that are not possible with standard methods. New evidence for high school graduates is presented by gender, and it is found that, while for young women the two states are distinct, for young men they are not.

Suggested Citation

  • 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.
    • Handle: RePEc:uwp:jhriss:v:27:y:1992:i:2:p:329-361
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    Cited by:

    1. Andrea Brandolini & Piero Cipollone & Eliana Viviano, 2006. "Does The Ilo Definition Capture All Unemployment?," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 153-179, March.
    2. Kuchibhotla, Murali, 2013. "Three essays in development economics," ISU General Staff Papers 201301010800004461, Iowa State University, Department of Economics.
    3. Bicakova, Alena & Kaliskova, Klara, 2016. "Career Breaks after Childbirth: The Impact of Family Leave Reforms in the Czech Republic," IZA Discussion Papers 10149, Institute of Labor Economics (IZA).
    4. Puhani, Patrick, 2003. "The Rise and Fall of Swiss Unemployment," CEPR Discussion Papers 3828, C.E.P.R. Discussion Papers.
    5. Alena Bic kov, 2005. "Unemployment Versus Inactivity: An Analysis of the Earnings and Labor Force Status of Prime Age Men in France, the UK, and the US at the End of the 20th Century," LIS Working papers 412, LIS Cross-National Data Center in Luxembourg.
    6. Aysit Tansel & H. Mehmet Taşçı, 2010. "Hazard Analysis of Unemployment Duration by Gender in a Developing Country: The Case of Turkey," LABOUR, CEIS, vol. 24(4), pages 501-530, December.
    7. Kingdon, Geeta & Knight, John, 2006. "The measurement of unemployment when unemployment is high," Labour Economics, Elsevier, vol. 13(3), pages 291-315, June.
    8. Ayça Akarçay Gürbüz & Sezgin Polat & Mustafa Ulus, 2014. "In Limbo: Exploring Transition to Discouragement," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 527-551, September.
    9. Millimet, Daniel L. & Nieswiadomy, Michael & Ryu, Hang & Slottje, Daniel, 2003. "Estimating worklife expectancy: an econometric approach," Journal of Econometrics, Elsevier, vol. 113(1), pages 83-113, March.
    10. Stephen R. G. Jones & W. Craig Riddell, 2006. "Unemployment and Nonemployment: Heterogeneities in Labor Market States," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 314-323, May.
    11. Peder Pedersen & Torben Schmidt, 2011. "What is unemployment in Europe? Concepts and measurement in the European community household panel," Empirical Economics, Springer, vol. 40(3), pages 705-728, May.
    12. Marc-Andre Pigeon & L. Randall Wray, "undated". "Down and Out in the United States, An Inside Look at the Out of the Labor Force Population," Economics Public Policy Brief Archive ppb_54, Levy Economics Institute.
    13. Aico Van Vuuren & Gerard J. Van Den Berg & Geert Ridder, 2000. "Measuring the equilibrium effects of unemployment benefits dispersion," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(6), pages 547-574.
    14. Patrick A. Puhani, 2002. "The Rise and Fall of Swiss Unemployment - Relative Demand Shocks, Wage Rigidities, and Temporary Immigrants," University of St. Gallen Department of Economics working paper series 2002 2002-29, Department of Economics, University of St. Gallen.
    15. Maria Ward Otoo, 1997. "The sources of worker anxiety: evidence from the Michigan survey," Finance and Economics Discussion Series 1997-48, Board of Governors of the Federal Reserve System (U.S.).
    16. Stephen R. G. Jones & Craig Riddell, 2000. "The Dynamics of US Labor Force Attachment," Econometric Society World Congress 2000 Contributed Papers 0011, Econometric Society.
    17. Byrne, David & Strobl, Eric, 2004. "Defining unemployment in developing countries: evidence from Trinidad and Tobago," Journal of Development Economics, Elsevier, vol. 73(1), pages 465-476, February.
    18. Marc-Andre Pigeon & L. Randall Wray, "undated". "Did the Clinton Rising Tide Raise All Boats? Job Opportunity for the Less Skilled," Economics Public Policy Brief Archive ppb_45, Levy Economics Institute.
    19. Goldsmith, Arthur H. & Veum, Jonathan R. & Darity, William Jr., 1995. "Are being unemployed and being out of the labor force distinct states?: A psychological approach," Journal of Economic Psychology, Elsevier, vol. 16(2), pages 275-295, July.
    20. Matteo Richiardi, 2002. "What Does the ECHP Tell Us About Labour Status Misperception: a Journey in Less Known Regions of Labour Discomfort," LABORatorio R. Revelli Working Papers Series 10, LABORatorio R. Revelli, Centre for Employment Studies.
    21. Cörvers,Frank & Golsteyn,Bart, 2003. "Changes in women's willingness to work in a tightening labour market: the impact of preferences, wages and individual characteristics," ROA Research Memorandum 005, Maastricht University, Research Centre for Education and the Labour Market (ROA).

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