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Adjusting the Gross Changes Data: Implications for Labor Market Dynamics

  • James M. Poterba
  • Lawrence H. Summers

This paper develops a procedure for adjusting the Current Population Survey gross changes data for the effects of reporting errors. The corrected data suggest that the labor market is much less dynamic than has frequently been suggested. Conventional measures sy understate the duration of unemployment by as much as eighty percent and overstate the extent of movement into and out ofthe labor force by several hundred percent. The adjusted data also throw demographic differences in patterns of labor market dynamics into sharp relief.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1436.

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Date of creation: Aug 1984
Date of revision:
Publication status: published as Poterba, James M. and Lawrence H. Summers."Adjusting the Gross Change Data: Implications for Labor Market, Dynamics," Econometrica, Vol. 54, No. 6, ( November 1986), pp. 1319-1338.
Handle: RePEc:nbr:nberwo:1436
Note: LS
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  1. Salant, Stephen W, 1977. "Search Theory and Duration Data: A Theory of Sorts," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 39-57, February.
  2. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 13-72.
  3. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 254-83, June.
  4. Hall, Robert E., 1979. "A theory of the natural unemployment rate and the duration of employment," Journal of Monetary Economics, Elsevier, vol. 5(2), pages 153-169, April.
  5. James M. Poterba & Lawrence H. Summers, 1983. "Survey Response Variation in the Current Population Survey," NBER Working Papers 1109, National Bureau of Economic Research, Inc.
  6. Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-56, July.
  7. George A. Akerlof & Brian G. M. Main, 1978. "Unemployment spells and unemployment experience," Special Studies Papers 123, Board of Governors of the Federal Reserve System (U.S.).
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