The Role of Observed and Unobserved Heterogeneity in the Duration of Unemployment Spells

Hie Joo Ahn
Additional contact information
Hie Joo Ahn: https://www.federalreserve.gov/econres/hie-joo-ahn.htm

No 2016-063r1, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper studies the degree to which observable and unobservable worker characteristics account for the variation in the aggregate duration of unemployment. I model the distribution of unobserved worker heterogeneity as time varying to capture the interaction of latent attributes with changes in labor-market conditions. Unobserved heterogeneity is the main explanation for the duration dependence of unemployment hazards. Both cyclical and low-frequency variations in the mean duration of unemployment are mainly driven by one subgroup: workers who, for unobserved reasons, stay unemployed for a long time. In contrast, changes in the composition of observable characteristics of workers have negligible effects.

Keywords: unemployment duration; disaggregate unemployment; unobserved heterogeneity; genuine duration dependence; nonlinear 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: 42 pages
Date: 2016-07-29, Revised 2022-03-25
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2016063r1pap.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-63

DOI: 10.17016/FEDS.2016.063r1

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().