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

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Abstract

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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    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.
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    More about this item

    Keywords

    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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