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Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?

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  • Christopher J. Flinn
  • James J. Heckman

Abstract

This paper formulates and tests the hypothesis that the categories unemployed and out of the labor force are behaviorally distinct labor force states. Our empirical results indicate that they are. In the empirically relevant range the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment. This evidence is shown to be consistent with a simple job search model of productive unemployment with log concave wage offer distributions. We prove that if unemployed workers receive job offers more frequently than workers out of the labor force, and if wage offer distributions are log concave, the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment.

Suggested Citation

  • Christopher J. Flinn & James J. Heckman, 1982. "Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?," NBER Working Papers 0979, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0979
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    1. Kim B. Clark & Lawrence H. Summers, 1982. "The Dynamics of Youth Unemployment," NBER Chapters,in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 199-234 National Bureau of Economic Research, Inc.
    2. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc.
    3. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    4. Flinn, C. & Heckman, J., 1982. "New methods for analyzing structural models of labor force dynamics," Journal of Econometrics, Elsevier, vol. 18(1), pages 115-168, January.
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