Heterogeneity and Unemployment Dynamics

Hie Joo Ahn and James Hamilton
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Hie Joo Ahn: https://www.federalreserve.gov/econres/hie-joo-ahn.htm

No 2016-12, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper develops new estimates of flows into and out of unemployment that allow for unobserved heterogeneity across workers as well as direct effects of unemployment duration on unemployment-exit probabilities. Unlike any previous paper in this literature, we develop a complete dynamic statistical model that allows us to measure the contribution of different shocks to the short-run, medium-run, and long-run variance of unemployment as well as to specific historical episodes. We find that changes in the inflows of newly unemployed are the key driver of economic recessions and identify an increase in permanent job loss as the most important factor.

Keywords: Business cycles; Great Recession; unemployment durations; Unobserved heterogeneity; Duration dependence; State space model; Extended Kalman filter (search for similar items in EconPapers)
JEL-codes: C41 C53 E24 E27 E32 J21 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2016-02-22
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Citations: View citations in EconPapers (3)

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https://www.federalreserve.gov/econresdata/feds/2016/files/2016012pap.pdf (Original) (application/pdf)

Related works:
Working Paper: Heterogeneity and Unemployment Dynamics (2016)
Working Paper: Heterogeneity and Unemployment Dynamics (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-12

DOI: 10.17016/FEDS.2016.012r1

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