Working Paper

Long-Term Unemployment: Attached and Mismatched?

Abstract: In this paper, I quantify the contribution of occupation-specific shocks and skills to unemployment duration and its cyclical dynamics. I quantify specific skills using microdata on wages, estimating occupational switching cost as a function of the occupations' difference in skills. The productivity shocks are consistent with job finding rates by occupation. For the period 1995-2013, the model captures 69.5% of long-term unemployment in the data, while a uniform finding rate delivers only 47.2%. In the Great Recession, the model predicts 72.9% of the long-term unemployment that existed in the data whereas a uniform finding rate would predict 57.8%.

Keywords: Occupational Choice; Human Capital; Unemployment Duration;

JEL Classification: E24; E32; J24; J64;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2015-12-02

Number: 2015-42

Pages: 58 pages