Employment Hysteresis from the Great Recession

Danny Yagan

Journal of Political Economy, 2019, vol. 127, issue 5, 2505 - 2558

Abstract: This paper uses US local areas as a laboratory to test for long-term impacts of the Great Recession. In administrative longitudinal data, I estimate that exposure to a 1 percentage point larger 2007–9 local unemployment shock reduced 2015 working-age employment rates by over 0.3 percentage points. Rescaled, this long-term recession impact accounts for over half of the 2007–15 US age-adjusted employment decline. Impacts were larger among older and lower-earning individuals and typically involved a layoff but are present even in a mass-layoffs sample. Disability insurance and out-migration yielded little income replacement. These findings reveal that the Great Recession imposed employment and income losses even after unemployment rates signaled recovery.

Date: 2019
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Working Paper: Employment Hysteresis from the Great Recession (2017)
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