Reassessing the Ins and Outs of Unemployment

By Robert Shimer. 2007

1,345 citations recorded by the source corpus.

This paper uses readily accessible data to measure the probability that an employed worker becomes unemployed and the probability that an unemployed worker finds a job, the ins and outs of unemployment. Since 1948, the job finding probability has accounted for three-quarters of the fluctuations in the unemployment rate in the United States and the employment exit probability for one-quarter. Fluctuations in the employment exit probability are quantitatively irrelevant during the last two decades. Using the underlying microeconomic data, the paper shows that these results are not due to compositional changes in the pool of searching workers, nor are they due to movements of workers in and out of the labor force. These results contradict the conventional wisdom that has guided the development of macroeconomic models of the labor market during the last fifteen years.

View Paper: https://www.semanticscholar.org/paper/42fdbb19f45b1810dafc030863355817b37fde66

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Citations in the corpus

Labor-Market Polarization over the Business Cycle (2015, unknown): “A long literature has studied the degree to which unemployment rises in recessions because of higher Labor- Market Polarization over the Business Cycle 391 inflows into the unemployment pool versus lower outflows out of it (Shimer 2005; Elsby, Michaels, and Solon 2009; Shimer 2012).”
The recent decline in employment dynamics (2013, methodology): “The CPS gross flows have been widely used to understand unemployment dynamics across the business cycle – see, for example, Elsby, Michaels, and Solon (2009), Barnichon and Nekarda (2012), and Shimer (2012).”
The Cyclicality of Separation and Job Finding Rates (2008, methodology): “Shimer (2005a) argues that the measured magnitudes of the two hazard rates make it reasonable to use the following approximation:”
Inflation Dynamics with Search Frictions: A Structural Econometric Analysis (2008, unknown): “¶1−η ( 29 ) with respect to hours, to obtains (using the previous result (1 − η) 1”
The Determinants of Rising Informality in Brazil: Evidence from Gross Worker Flows (2007, methodology): “We follow Shimer’s (2005a) strategy of isolating the impact of a given type of gross flows on the aggregate sector sizes by using the generated instantaneous transition probabilities to construct the predicted steady state values of our five possible states for each period.”
U.S. Labor Market Dynamics Revisited (2007, unknown): “But recently Shimer (2007) and Hall (2005) claimed that separation rates (δ) are not as volatile as job finding rates (p UE = M UE U ) and that they can be taken, roughly, as constant (in detrended terms).”
Decomposing the Ins and Outs of Cyclical Unemployment (2012, unknown): “A revised version may be available directly from the author.”
Minimum Wage Shocks, Employment Flows, and Labor Market Frictions (2012, background): “Indeed, longer spells between jobs and fewer job-tojob transtions both occur during economic downturns (e.g., Shimer 2005, 2012).”
More on Unemployment and Vacancy Fluctuations (2007, unknown): “" As the worker quits a match with idiosyncratic component x at rate f(θp)[1− F (x)], the value of a filled job solves rJp(x) = p− k − wp − (sp + f(θp)[1− F (x)])Jp + λ[EpJp0 − Jp] Given the wage rule, equation (25),”
An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining (2008, unknown): “Then the household’s budget constraint is ct + it + Bt ptrt = wtnt + (1− nt) bt + rkt ztkpt−1 +Πt + Tt − a (zt) kpt−1 + Bt−1 pt .”