Employment Hysteresis from the Great Recession

Danny Yagan

No 23844, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses U.S. local areas as a laboratory to test whether the Great Recession depressed 2015 employment. In full-population longitudinal data, I find that exposure to a 1-percentage-point-larger 2007-2009 local unemployment shock caused working-age individuals to be 0.4 percentage points less likely to be employed at all in 2015, evidently via labor force exit. These shocks also increased 2015 income inequality. General human capital decay and persistently low labor demand each rationalize the findings better than lost job-specific rents, lost firm-specific human capital, or reduced migration. Simple extrapolation suggests the recession caused most of the 2007-2015 age-adjusted employment decline.

JEL-codes: E0 H0 L0 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-mac and nep-ure
Note: EFG LS PE
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Citations: View citations in EconPapers (23)

Published as Danny Yagan, 2019. "Employment Hysteresis from the Great Recession," Journal of Political Economy, vol 127(5), pages 2505-2558.

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