Measuring Heterogeneity in Job Finding Rates Among the Non-Employed Using Labor Force Status Histories Link to Jan 2018 FRBSF Working Paper
Earlier version (Link to 2014 FRBR Working Paper)
by Marianna Kudlyak and Fabian Lange
Abstract: We construct a novel measure of the duration of joblessness using the labor force status histories in the four-month CPS panels. This duration measure dominates other existing measures in the CPS for predicting transitions from non-employment to employment. The job finding rate declines with the duration of joblessness both among the unemployed and those out of the labor force (OLF). For those OLF, the variation in job finding rates explained by the duration of joblessness is five times larger than the variation explained by the self-reported desire to work or reasons for not searching. For the unemployed, the self-reported duration of unemployment is not equivalent to the duration of joblessness. The discrepancy between the two duration measures is not a classification error. Instead, the self-reports of unemployment durations refer to how long the respondent looked for work, often disregarding short-term jobs or including periods of employment while searching. The job finding rate declines with the self-reported duration of unemployment only to the extent that this variable correlates with the duration of joblessness. Using our novel measure, we provide new estimates of the duration distribution of the unemployed and reexamine current approaches to misclassification error in the CPS.
Key words: Job Finding Rate. OLF. Unemployment. Duration Dependence. Heterogeneity. Misclassification Error.
Media coverage: Econbrowser, Market Watch International
Presentations:Slides, FRB Macro-Labor Meeting, Washington DC (5/18-19/2017), CADRE Workshop at Kansas City FED (May 2017), BLS (3/23/2016), Econometric Society World Congress (August 2015, Montreal, Canada), FRB Chicago (August 2015), SED (June 2015), SOLE (June 2015, by coauthor), System Applied Micro Meeting at FRB Dallas (May 2015), CADRE Workshop at Kansas City FED (May 2015), Elon University (April 2015), U Montreal (April 2015), Kentucky-FRB Cleveland 2015 Labor Market Workshop (February 2015), Stockman Conference at Rochester (October 2014), System Applied Micro Meeting at FRB Minneapolis (May 2014), S