Duration structure of unemployment hazards and the trend unemployment rate

Hie Joo Ahn

Journal of Economic Dynamics and Control, 2023, vol. 151, issue C

Abstract: This paper develops a new method to estimate the trend unemployment rate in which the duration profile of unemployment hazards is taken into account. The duration profile is characterized by three time-varying elements—level, slope, and curvature. The model also recovers the duration component of trend unemployment rate and the trend mean duration of unemployment. The estimated trend unemployment rate declines by about 3 percentage points between 1980 and 2019. Its short-term duration component decreases, whereas the long-term component increases, resulting in a rise in the trend mean duration of unemployment. The opposite trends in duration components suggest falling frictional unemployment but rising structural unemployment.

Keywords: Trend unemployment rate; Unemployment duration; Duration dependence; Trend-cycle decomposition; Nonlinear state space model; Extended Kalman filter; Nelson–Siegel model (search for similar items in EconPapers)
JEL-codes: C41 C53 E24 E27 E32 J21 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:151:y:2023:i:c:s0165188923000702

DOI: 10.1016/j.jedc.2023.104664

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