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Decomposing the Ins and Outs of Cyclical Unemployment

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  • Bachmann, Ronald
  • Sinning, Mathias

Abstract

This paper analyzes the contribution of the socioeconomic and demographic composition of the pool of employed and unemployed individuals to the dynamics of the labor market in different phases of the business cycle. Using individual level data from the Current Population Survey (CPS), we decompose differences in employment status transition rates between economic upswings and downturns into composition effects and behavioral effects. We find that overall composition effects play a minor role for the cyclicality of the unemployment outflow rate, although the contribution of the duration of unemployment is significant. In contrast, composition effects dampen the cyclicality of the unemployment inflow rate considerably. We further observe that the initially positive contribution of composition effects to a higher unemployment outflow rate turns negative over the course of the recession.

Suggested Citation

  • Bachmann, Ronald & Sinning, Mathias, 2011. "Decomposing the Ins and Outs of Cyclical Unemployment," Ruhr Economic Papers 305, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  • Handle: RePEc:zbw:rwirep:305
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    Cited by:

    1. Ronald Bachmann & Peggy Bechara & Anica Kramer & Sylvi Rzepka, 2015. "Labour market dynamics and worker heterogeneity during the Great Recession – Evidence from Europe," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-29, December.
    2. Pizzinelli, Carlo & Speigner, Bradley, 2017. "Matching efficiency and labour market heterogeneity in the United Kingdom," Bank of England working papers 667, Bank of England.
    3. Robert E. Hall & Sam Schulhofer-Wohl, 2018. "Measuring Job-Finding Rates and Matching Efficiency with Heterogeneous Job-Seekers," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 1-32, January.
    4. Ahn, Hie Joo, 2016. "Heterogeneity in the Dynamics of Disaggregate Unemployment," Finance and Economics Discussion Series 2016-063, Board of Governors of the Federal Reserve System (U.S.).
    5. Hie Ahn & James Hamilton, 2016. "Heterogeneity and Unemployment Dynamics," Working Papers id:11130, eSocialSciences.
    6. Sara Rica & Yolanda F. Rebollo-Sanz, 2017. "Gender Differentials in Unemployment Ins and Outs during the Great Recession in Spain," De Economist, Springer, vol. 165(1), pages 67-99, March.
    7. Elish Kelly & Seamus McGuinness & Philip J O’connell & David Haugh & Alberto GonzÁlez Pandiella, 2014. "Transitions In and Out of Unemployment among Young People in the Irish Recession," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 56(4), pages 616-634, December.
    8. Sam Schulhofer-Wohl & Robert Hall, 2014. "Measuring Matching Efficiency with Heterogeneous Jobseekers," 2014 Meeting Papers 368, Society for Economic Dynamics.
    9. repec:taf:irapec:v:31:y:2017:i:2:p:173-190 is not listed on IDEAS

    More about this item

    Keywords

    Gross worker flows; unemployment duration; decomposition analysis; Blinder-Oaxaca; Gross worker flows; unemployment duration; decomposition analysis; Blinder-Oaxaca;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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