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Are the Long-Term Unemployed on the Margins of the Labor Market?

Author(s): Krueger, Alan B; Cramer, Judd; Cho, David

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Abstract: Long-term transition rates calculated from the Current Population Survey, the Survey of Income and Program Participation, and Rutgers University’s Work Trends Survey indicate that the long-term unemployed have a 20 to 40 percent lower probability of being employed 1 to 2 years in the future than do the short-term unemployed. In comparison with the short-term unemployed, for the long-term unemployed the job finding rate is less sensitive to the state of the business cycle, but their labor force withdrawal rate is more procyclical. A calibration exercise finds that the tendency of the labor force withdrawal rate of the long-term unemployed to decline in a recession and then rise in a recovery plays an important role in the well-documented loop around the Beveridge curve. Overall, the results suggest that the longer workers are unemployed, the less attached they become to the labor market.
Publication Date: 2014
Citation: Krueger, Alan B, Cramer, Judd, Cho, David. (2014). Are the Long-Term Unemployed on the Margins of the Labor Market?. Brookings Papers on Economic Activity, 2014 (1), 229 - 299. doi:10.1353/eca.2014.0004
DOI: doi:10.1353/eca.2014.0004
EISSN: 1533-4465
Pages: 229 - 299
Type of Material: Journal Article
Journal/Proceeding Title: Brookings Papers on Economic Activity
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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