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Luigi Pistaferri, Consumption Inequality and Family Labor Supply

The Ins and Outs of Cyclical Unemployment

Archived Abstract of Former PSC Researcher

Elsby, Michael, Ryan Michaels, and Gary Solon. 2009. "The Ins and Outs of Cyclical Unemployment." American Economic Journal-Macroeconomics, 1(1): 84-110.

A dominant trend in recent modeling of labor market fluctuations is to treat unemployment inflows as acyclical. This trend has been encouraged by recent influential papers that stress the role of longer unemployment spells, rather than more unemployment spells, in accounting for recessionary unemployment. After reviewing an empirical literature going back several decades, we apply a convenient log change decomposition to Current Population Survey data to characterize rising unemployment in each postwar recession. We conclude that a complete understanding of cyclical unemployment requires an explanation of countercyclical inflow rates, especially for job losers (layoffs), as well as procyclical outflow rates. (JEL E24, E32)

DOI:10.1257/mac.1.1.84 (Full Text)

Country of focus: United States of America.

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