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The Impact of the Age Distribution on Unemployment: Evidence from US States



Economists have studied the potential effects of shifts in the age distribution on the unemployment rate for more than 50 years. Most of this analysis uses a "shift-share" method, which assumes that the demographic structure has no indirect effects on age-specific unemployment rates. This paper uses state-level data to revisit the influence of the age distribution on unemployment in the United States. We examine demographic effects across the entire age distribution rather than just the youth share of the population — the focus of most previous work — and extend the date range of analysis beyond that which was available for previous research. We find that shifts in the age distribution move the unemployment rate in the direction that a mechanical shift-share model would predict. But these effects are larger than the mechanical model would generate, indicating the presence of amplifying indirect effects of the age distribution on unemployment.

Suggested Citation

  • Bruce Fallick & Christopher L. Foote, 2022. "The Impact of the Age Distribution on Unemployment: Evidence from US States," Working Papers 22-27, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwq:94924
    DOI: 10.26509/frbc-wp-202227

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    References listed on IDEAS

    1. Richard K. Crump & Stefano Eusepi & Marc Giannoni & Aysegul Sahin, 2019. "A unified approach to measuring u," Staff Reports 889, Federal Reserve Bank of New York.
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    3. Robert L. Clark & Beth M. Ritter, 2020. "How Are Employers Responding to an Aging Workforce?," NBER Working Papers 26633, National Bureau of Economic Research, Inc.
    4. Congressional Budget Office, 2019. "The Budget and Economic Outlook: 2019 to 2029," Reports 54918, Congressional Budget Office.
    5. Didem Tuzemen, 2017. "A New Estimate of the Natural Rate of Unemployment," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-4, November.
    6. Congressional Budget Office, 2019. "An Update to the Budget and Economic Outlook: 2019 to 2029," Reports 55551, Congressional Budget Office.
    7. Lee, Lung-fei & Yu, Jihai, 2010. "Estimation of spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 154(2), pages 165-185, February.
    8. David Neumark & Maysen Yen, 2020. "Relative Sizes of Age Cohorts and Labor Force Participation of Older Workers," Demography, Springer;Population Association of America (PAA), vol. 57(1), pages 1-31, February.
    9. Damir Cosic & C. Eugene Steuerle, 2021. "Is Demand for Older Workers Adjusting to an Aging Labor Force?," Working Papers, Center for Retirement Research at Boston College wp2021-18, Center for Retirement Research.
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    More about this item


    age distribution; unemployment; demographics; shift-share;
    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
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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