Portuguese Economic Journal

, Volume 5, Issue 2, pp 111–134 | Cite as

Re-employment probabilities over the business cycle

Original Paper

Abstract

Using a Cox proportional hazard model that allows for a flexible time dependence in order to incorporate business cycle effects, we analyze the determinants of re-employment probabilities of young workers in the USA from 1978–1989. We find considerable changes in the chances of young workers finding jobs over the business cycle despite the fact that personal characteristics of those starting jobless spells do not vary much over time. Therefore, government programs that target specific demographic groups may change individuals’ positions within the queue of job seekers, but may only have a more limited impact on average re-employment probabilities. Living in an area with high local unemployment reduces re-employment chances as does being in a long spell of non-employment. However, the damage associated with being in a long spell seems to be reduced somewhat if a worker is unemployed in an area with high overall unemployment.

Keywords

Unemployment Duration dependence Business cycle 

JEL Classification

E24 E32 J2 J6 

Notes

Acknowledgements

We would like to thank Phil Johnson for excellent research assistance on this project and Olivier Blanchard, Bruce Meyer, Jonathon Thomas, two anonymous referees, and participants in seminars at the NBER, MIT, and the University of British Columbia for comments on an earlier draft.

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Copyright information

© Springer-Verlag 2006

Authors and Affiliations

  1. 1.Fletcher SchoolTufts UniversityMedfordUSA
  2. 2.NBERCambridgeUSA
  3. 3.Harvard UniversityCambridgeUSA

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