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Unemployment, Participation and Worker Flows Over the Life-Cycle

  • Sekyu Choi
  • Alexandre Janiak
  • Benjamín Villena-Roldán

We estimate and report life-cycle transition probabilities between employment, unemployment and inactivity for male and female workers using Current Population Survey monthly files. We assess the relative importance of each probability in explaining the life-cycle profiles of participation and unemployment rates using a novel decomposition method. A key robust finding is that most differences in participation and unemployment over the life-cycle can be attributed to the probability of leaving employment and the probability of transiting from inactivity to unemployment, while transitions from unemployment to employment (the job finding probability) play secondary roles. We conclude that search models that seek to explain life-cycle work patterns should not ignore transitions to and from inactivity.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 617.

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Date of creation: Mar 2012
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Handle: RePEc:bge:wpaper:617
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  1. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation, And Labor Market Flows," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 851-882, 06.
  2. Krusell, Per & Mukoyama, Toshihiko & Rogerson, Richard & Sahin, Aysegül, 2008. "Aggregate implications of indivisible labor, incomplete markets, and labor market frictions," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 961-979, July.
  3. Alexandre Janiak & Paulo Santos Monteiro, 2010. "Labor force heterogeneity: implications for the relation between aggregate volatility and government size," Documentos de Trabajo 272, Centro de Economía Aplicada, Universidad de Chile.
  4. Thomas J. Sargent & Lars Ljungqvist & Sagiri Kitao, 2009. "A Life Cycle Model of Trans-Atlantic Employment Experiences," 2009 Meeting Papers 914, Society for Economic Dynamics.
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  6. Veracierto, Marcelo, 2008. "On the cyclical behavior of employment, unemployment and labor force participation," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1143-1157, September.
  7. Jean-Olivier Hairault & Francois Langot & Thepthida Sopraseuth, 2010. "Distance to Retirement and Older Workers' Employment: The Case for Delaying the Retirement Age," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 1034-1076, 09.
  8. Shigeru Fujita & Garey Ramey, 2007. "The cyclicality of separation and job finding rates," Working Papers 07-19, Federal Reserve Bank of Philadelphia.
  9. Gary D. Hansen & Selahattin Imrohoroglu, 2006. "Consumption Over the Life Cycle: The Role of Annuities," NBER Working Papers 12341, National Bureau of Economic Research, Inc.
  10. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 254-83, June.
  11. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2011. "Life Cycle Equilibrium Unemployment," CEPREMAP Working Papers (Docweb) 1103, CEPREMAP.
  12. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
  13. Morten O. Ravn, 2006. "The Consumption-Tightness Puzzle," NBER Working Papers 12421, National Bureau of Economic Research, Inc.
  14. Pries, Michael & Rogerson, Richard, 2009. "Search frictions and labor market participation," European Economic Review, Elsevier, vol. 53(5), pages 568-587, July.
  15. Fernando Alvarez & Marcelo Veracierto, 2000. "Labor-Market Policies in an Equilibrium Search Model," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 265-316 National Bureau of Economic Research, Inc.
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