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Accounting for unemployment in the Great Recession : nonparticipation matters

  • Marianna Kudlyak
  • Felipe Schwartzman

We conduct an accounting exercise of the role of worker flows between unemployment, employment, and labor force nonparticipation in the dynamics of the aggregate unemployment rate across four recent recessions: 1982-1983, 1990-1991, 2001, and 2007-2009 (the "Great Recession"). We show that, whereas during earlier recessions it was sufficient to examine the flows between employment and unemployment to account for the dynamics of the unemployment rate, this was not true in the Great Recession. The increased importance of the flows between nonparticipation and unemployment is documented across all age and gender groups.

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Paper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 12-04.

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Date of creation: 2012
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Handle: RePEc:fip:fedrwp:12-04
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  1. Poterba, James M & Summers, Lawrence H, 1986. "Reporting Errors and Labor Market Dynamics," Econometrica, Econometric Society, vol. 54(6), pages 1319-38, November.
  2. Michael W. L. Elsby & Bart Hobijn & Aysegul Sahin, 2010. "The Labor Market in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(1 (Spring), pages 1-69.
  3. Michael W. L. Elsby & Jennifer C. Smith & Jonathan Wadsworth, 2011. "The role of worker flows in the dynamics and distribution of UK unemployment," Oxford Review of Economic Policy, Oxford University Press, vol. 27(2), pages 338-363.
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  5. Jennifer C. Smith, 2011. "The Ins and Outs of UK Unemployment," Economic Journal, Royal Economic Society, vol. 121(552), pages 402-444, 05.
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  7. Shigeru Fujita & Garey Ramey, 2009. "The Cyclicality Of Separation And Job Finding Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(2), pages 415-430, 05.
  8. Gomes, Pedro, 2012. "Labour market flows: Facts from the United Kingdom," Labour Economics, Elsevier, vol. 19(2), pages 165-175.
  9. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  10. Aysegül Sahin & Joseph Song & Bart Hobijn, 2010. "The unemployment gender gap during the 2007 recession," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 16(Feb).
  11. Per Krusell & Toshihiko Mukoyama & Richard Rogerson & Ayşegül Şahin, 2012. "Is Labor Supply Important for Business Cycles?," NBER Working Papers 17779, National Bureau of Economic Research, Inc.
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