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American Economic Journal: Macroeconomics: Vol. 1 No. 1 (January 2009)

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The Ins and Outs of Cyclical Unemployment

Article Citation

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

DOI: 10.1257/mac.1.1.84

Abstract

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)

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Authors

Elsby, Michael W. L. (U MI)
Michaels, Ryan (U MI)
Solon, Gary (MI State U)

JEL Classifications

E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
E32: Business Fluctuations; Cycles

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American Economic Journal: Macroeconomics


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