The Consequences of Long Term Unemployment: Evidence from Matched Employer-Employee Data
Katharine Abraham (),
L. Kristin Sandusky () and
James R. Spletzer ()
Additional contact information
L. Kristin Sandusky: U.S. Census Bureau
James R. Spletzer: U.S. Census Bureau
No 10223, IZA Discussion Papers from Institute for the Study of Labor (IZA)
It is well known that the long-term unemployed fare worse in the labor market than the short-term unemployed, but less clear why this is so. One potential explanation is that the long-term unemployed are "bad apples" who had poorer prospects from the outset of their spells (heterogeneity). Another is that their bad outcomes are a consequence of the extended unemployment they have experienced (state dependence). We use Current Population Survey (CPS) data on unemployed individuals linked to wage records for the same people to distinguish between these competing explanations. For each person in our sample, we have wage record data that cover the period from 20 quarters before to 11 quarters after the quarter in which the person is observed in the CPS. This gives us rich information about prior and subsequent work histories not available to previous researchers that we use to control for individual heterogeneity that might be affecting subsequent labor market outcomes. Even with these controls in place, we find that unemployment duration has a strongly negative effect on the likelihood of subsequent employment. This finding is inconsistent with the heterogeneity ("bad apple") explanation for why the long-term unemployed fare worse than the short-term unemployed. We also find that longer unemployment durations are associated with lower subsequent earnings, though this is mainly attributable to the long-term unemployed having a lower likelihood of subsequent employment rather than to their having lower earnings once a job is found.
Keywords: unemployment duration; heterogeneity; state dependence (search for similar items in EconPapers)
JEL-codes: J64 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (15) Track citations by RSS feed
Downloads: (external link)
Working Paper: The Consequences of Long Term Unemployment: Evidence from Matched Employer-Employee Data* (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp10223
Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Access Statistics for this paper
More papers in IZA Discussion Papers from Institute for the Study of Labor (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Mark Fallak ().