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Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?

Christopher Flinn () and James Heckman

No 979, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper formulates and tests the hypothesis that the categories unemployed and out of the labor force are behaviorally distinct labor force states. Our empirical results indicate that they are. In the empirically relevant range the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment. This evidence is shown to be consistent with a simple job search model of productive unemployment with log concave wage offer distributions. We prove that if unemployed workers receive job offers more frequently than workers out of the labor force, and if wage offer distributions are log concave, the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment.

New Economics Papers: this item is included in nep-lab and nep-ltv
Date: 1982-09
Note: LS
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Published as Journal of Labor Economics, Vol. 1, no. 1 (January 1983): pp. 28-42.

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