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Long-Term Unemployment: Attached and Mismatched?

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Abstract

In this paper, I quantify the contribution of occupation-specific shocks and skills to unemployment duration and its cyclical dynamics. I quantify specific skills using microdata on wages, estimating occupational switching cost as a function of the occupations' difference in skills. The productivity shocks are consistent with job finding rates by occupation. For the period 1995-2013, the model captures 69.5% of long-term unemployment in the data, while a uniform finding rate delivers only 47.2%. In the Great Recession, the model predicts 72.9% of the long-term unemployment that existed in the data whereas a uniform finding rate would predict 57.8%.

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  • Wiczer, David, 2015. "Long-Term Unemployment: Attached and Mismatched?," Working Papers 2015-42, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2015-042
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877.
    2. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    3. Lombardo, Giovanni & Sutherland, Alan, 2007. "Computing second-order-accurate solutions for rational expectation models using linear solution methods," Journal of Economic Dynamics and Control, Elsevier, vol. 31(2), pages 515-530, February.
    4. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.
    5. Nakajima, Makoto, 2012. "A quantitative analysis of unemployment benefit extensions," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 686-702.
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    7. Sullivan, Paul, 2010. "Empirical evidence on occupation and industry specific human capital," Labour Economics, Elsevier, vol. 17(3), pages 567-580, June.
    8. Mitman, Kurt & Rabinovich, Stanislav, 2015. "Optimal unemployment insurance in an equilibrium business-cycle model," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 99-118.
    9. Boskin, Michael J, 1974. "A Conditional Logit Model of Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 389-398, Part I, M.
    10. Neil Mehrotra & Dmitriy Sergeyev, 2013. "Sectoral Shocks, the Beveridge Curve and Monetary Policy," 2013 Meeting Papers 919, Society for Economic Dynamics.
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    Citations

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    Cited by:

    1. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.
    2. Dmitry Plotnikov, 2014. "Hysteresis in Unemployment and Jobless Recoveries," IMF Working Papers 14/77, International Monetary Fund.
    3. William Hawkins & Carlos Carrillo-Tudela, 2014. "A Generalized Model of Stock-Flow Matching," 2014 Meeting Papers 1380, Society for Economic Dynamics.
    4. Maximiliano Dvorkin, 2013. "Sectoral Shocks, Reallocation and Unemployment in a Model of Competitive Labor Markets," 2013 Meeting Papers 1229, Society for Economic Dynamics.
    5. Ravn, Morten O. & Sterk, Vincent, 2017. "Job uncertainty and deep recessions," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 125-141.
    6. Carrillo-Tudela, Carlos & Hobijn, Bart & She, Powen & Visschers, Ludo, 2016. "The extent and cyclicality of career changes: Evidence for the U.K," European Economic Review, Elsevier, vol. 84(C), pages 18-41.
    7. Bauer, Anja, 2016. "Reallocation patterns across occupations in Germany," Economics Letters, Elsevier, vol. 148(C), pages 111-114.
    8. Lalé, Etienne, 2017. "Worker reallocation across occupations: Confronting data with theory," Labour Economics, Elsevier, vol. 44(C), pages 51-68.
    9. Carrillo-Tudela, Carlos & Visschers, Ludo, 2014. "Unemployment and Endogenous Reallocation over the Business Cycle," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-35, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Carrillo-Tudela, Carlos & Hobijn, Bart & She, Powen & Visschers, Ludo, 2015. "The Extent and Cyclicality of Career Changes: Evidence for the UK," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-52, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Jacob Wong, 2017. "Aggregate Reallocation Shocks, Occupational Employment and Distance," School of Economics Working Papers 2017-09, University of Adelaide, School of Economics.
    12. Carlos Carrillo-Tudela & Bart Hobijn & Powen She & Ludo Visschers, 2014. "The Extent and Cyclicality of Career Changes: Evidence for the UK (first version)," ESE Discussion Papers 246, Edinburgh School of Economics, University of Edinburgh.
    13. Eubanks, James D. & Wiczer, David, 2016. "Duration Dependence and Composition in Unemployment Spells," Review, Federal Reserve Bank of St. Louis, vol. 98(4), pages 263-276.
    14. Simon Mongey & Gianluca Violante & Alessandro Gavazza, 2014. "What Shifts the Beveridge Curve? Recruitment Effort and Financial Shocks," 2014 Meeting Papers 1014, Society for Economic Dynamics.
    15. William Hawkins & Carlos Carrillo-Tudela, 2016. "A Stock-Flow Theory of Unemployment with Endogenous Match Formation," 2016 Meeting Papers 1542, Society for Economic Dynamics.
    16. Bauer, Anja, 2015. "Reallocation patterns across occupations," IAB Discussion Paper 201526, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    Occupational Choice; Human Capital; Unemployment Duration;

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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