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Duration Dependence and Labor Market Conditions: Theory and Evidence from a Field Experiment

Kory Kroft, Fabian Lange () and Matthew Notowidigdo

CLSSRN working papers from Vancouver School of Economics

Abstract: This paper studies the role of employer behavior in generating “negative duration dependence†– the adverse effect of a longer unemployment spell – by sending fictitious resumes to real job postings in 100 U.S. cities. Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker’s unemployment spell, with the majority of this decline occurring during the first eight months. We explore how this effect varies with local labor market conditions, and find that duration dependence is stronger when the labor market is tighter. We develop a theoretical framework that shows how the sign of this interaction effect can be used to discern among leading models of duration dependence based on employer screening, employer ranking, and human capital depreciation. Our results suggest that employer screening plays an important role in generating duration dependence; employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets.

Keywords: Duration dependence; screening; business cycle; skill depreciation (search for similar items in EconPapers)
JEL-codes: J64 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2012-09-28, Revised 2012-09-28
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Citations: View citations in EconPapers (14) Track citations by RSS feed

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http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%2 ... and%20Notowidigo.pdf (application/pdf)

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