Uncertainty and the geography of the Great Recession

Stan Veuger and Daniel Shoag

AEI Economics Working Papers from American Enterprise Institute

Abstract: We create a state-level measure of economic and police uncertainty during the 2007-2009 recession. Despite claims in the literature, the variation in this uncertainty measure matches the cross-sectional distribution of unemployment outcomes in this period. This relationship is robust to numerous controls for other determinants of labor market outcomes and produces a within-state pattern of effects across industries, occupations, and individuals that is consistent with standard "wait-and-see" models of firm behavior under uncertainty. Using preexisting state institutions that amplified uncertainty, we find evidence that this type of local uncertainty played a causal role in increasing unemployment. Together, these results suggest that increased uncertainty contributed to the severity of the Great Recession.

Keywords: unemployment; Great Recession; economics (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-mac and nep-ure
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Uncertainty and the geography of the great recession (2016)
Working Paper: Uncertainty and the Geography of the Great Recession (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:aei:rpaper:694

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