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Heterogeneity and Unemployment Dynamics

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  • Hie Ahn
  • James Hamilton

Abstract

This paper develops new estimates of flows into and out of unemployment that allow for unobserved heterogeneity across workers as well as direct effects of unemployment duration on unemployment-exit probabilities. Unlike any previous paper in this literature, it develops a complete dynamic statistical model that allows us to measure the contribution of different shocks to the short-run, medium-run, and long run variance of unemployment as well as to specific historical episodes. This paper finds that changes in the inflows of newly unemployed are the key driver of economic recessions and identify an increase in permanent job loss as the most important factor. [Working Paper 22451]

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  • Hie Ahn & James Hamilton, 2016. "Heterogeneity and Unemployment Dynamics," Working Papers id:11130, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:11130
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    References listed on IDEAS

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    Cited by:

    1. Pizzinelli, Carlo & Speigner, Bradley, 2017. "Matching efficiency and labour market heterogeneity in the United Kingdom," Bank of England working papers 667, Bank of England.
    2. Ravn, Morten O. & Sterk, Vincent, 2017. "Job uncertainty and deep recessions," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 125-141.
    3. Kory Kroft & Fabian Lange & Matthew J. Notowidigdo & Matthew Tudball, 2019. "Long Time Out: Unemployment and Joblessness in Canada and the United States," Journal of Labor Economics, University of Chicago Press, vol. 37(S2), pages 355-397.
    4. Gorry, Aspen & Munro, David & vom Lehn, Christian, 2020. "Experience, skill composition, and the persistence of unemployment fluctuations," Labour Economics, Elsevier, vol. 63(C).
    5. Josefine Quast & Maik H. Wolters, 2022. "Reliable Real-Time Output Gap Estimates Based on a Modified Hamilton Filter," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 40(1), pages 152-168, January.
    6. Hie Joo Ahn, 2016. "The Role of Observed and Unobserved Heterogeneity in the Duration of Unemployment Spells," Finance and Economics Discussion Series 2016-063r1, Board of Governors of the Federal Reserve System (U.S.), revised 25 Mar 2022.
    7. Carl Singleton, 2018. "Long‐Term Unemployment and the Great Recession: Evidence from UK Stocks and Flows," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(2), pages 105-126, May.
    8. Similan Rujiwattanapong, 2019. "Unemployment Dynamics and Unemployment Insurance Extensions under Rational Expectations," 2019 Meeting Papers 232, Society for Economic Dynamics.

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    More about this item

    Keywords

    unemployment; unobserved heterogeneity ; dynamic statistical model; economic recessions;
    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

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