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Why did the average duration of unemployment become so much longer?

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  • Toshihiko Mukoyama
  • Aysegul Sahin

Abstract

This paper examines the causes of the observed increase in the average duration of unemployment over the past thirty years. First we analyze whether changes in the demographic composition of the U.S. labor force, particularly the age and gender composition, can explain this increase. We then consider the contribution of institutional changes, such as the change in the generosity and coverage of unemployment insurance. We find that changes in the composition of the labor force and institutional changes can only partially account for the longer duration of unemployment. We construct a job search model and calibrate it to U.S. data. The results indicate that more than 70 percent of the increase in the duration of unemployment over the past thirty years can be attributed to an increase in within-group wage inequality.

Suggested Citation

  • Toshihiko Mukoyama & Aysegul Sahin, 2004. "Why did the average duration of unemployment become so much longer?," Staff Reports 194, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:194
    Note: For a published version of this report, see Toshihiko Mukoyama and Ayşegül Şahin, "Why Did the Average Duration of Unemployment Become So Much Longer?" Journal of Monetary Economics 56, no. 2 (March 2009): 200-9.
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    Cited by:

    1. Jordi Galí & Thijs van Rens, 2008. "The vanishing procyclicality of labor productivity," Economics Working Papers 1230, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2010.
    2. Ronald Bachmann & Mathias Sinning, 2011. "Decomposing the Ins and Outs of Cyclical Unemployment," Ruhr Economic Papers 0305, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. Ronald Bachmann & Mathias Sinning, 2016. "Decomposing the Ins and Outs of Cyclical Unemployment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(6), pages 853-876, December.
    4. Belapatiño, Vanessa & Céspedes, Nikita & Gutierrez, Ana Paola, 2014. "La duración del desempleo en Lima Metropolitana," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 27, pages 67-80.
    5. Ortego-Marti, Victor, 2016. "Unemployment history and frictional wage dispersion," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 5-22.
    6. Daniel Borowczyk-Martins & Etienne Lalé, 2016. "The Rise of Part-time Employment," Sciences Po publications 2016-04, Sciences Po.
    7. Céspedes, Nikita & Gutiérrez, Ana Paola & Belapatiño, Vanessa, 2013. "Determinantes de la duración del desempleo en una economía con alta informalidad," Working Papers 2013-022, Banco Central de Reserva del Perú.
    8. Schaeffer, Peter V. & Gebremedhin, Tesfa G., 2009. "Expected Time to Employment as a Function of Labor Market Size: A Theoretical Note," The Review of Regional Studies, Southern Regional Science Association, vol. 39(3), pages 287-295.
    9. Thomas B. King, 2005. "Labor productivity and job-market flows: trends, cycles, and correlations," Supervisory Policy Analysis Working Papers 2005-04, Federal Reserve Bank of St. Louis.
    10. Mukoyama, Toshihiko & Sahin, Aysegl, 2009. "Why did the average duration of unemployment become so much longer?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 200-209, March.
    11. Pedro Portugal & José Ferreira Machado & Juliana Guimarães, 2006. "U.S. Unemployment Duration: Has Long Become Longer or Short Become Shorter?," Working Papers w200613, Banco de Portugal, Economics and Research Department.
    12. Fujita, Shigeru, 2018. "Declining labor turnover and turbulence," Journal of Monetary Economics, Elsevier, vol. 99(C), pages 1-19.
    13. Mukoyama, Toshihiko, 2013. "Understanding the welfare effects of unemployment insurance policy in general equilibrium," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 347-368.
    14. Seik Kim & Emiko Usui, 2021. "Employer learning, job changes, and wage dynamics," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1286-1307, July.
    15. repec:kap:iaecre:v:20:y:2014:i:3:p:325-337 is not listed on IDEAS
    16. repec:zbw:rwirep:0305 is not listed on IDEAS
    17. Jordi Galí & Thijs van Rens, 2008. "The vanishing procyclicality of labor productivity," Economics Working Papers 1230, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2010.
    18. Louis Pantuosco & Laura Ullrich, 2014. "Factors of Immobility: Why the Unemployment Rate is Slow to Adjust," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(3), pages 325-337, August.
    19. Daniel Aaronson & Bhashkar Mazumder & Shani Schechter, 2010. "What is behind the rise in long-term unemployment?," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 34(Q II), pages 28-51.

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    More about this item

    Keywords

    Unemployment insurance; Labor market; Unemployment; Demography;
    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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