TY  - JOUR
AU  - Elsby,Michael W.
AU  - Michaels,Ryan
AU  - Solon,Gary
TI  - The Ins and Outs of Cyclical Unemployment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12853
PY  - 2007
Y2  - January 2007
UR  - http://www.nber.org/papers/w12853
L1  - http://www.nber.org/papers/w12853.pdf
N1  - Author contact info:
Michael W. Elsby
University of Edinburgh
School of Economics
31 Buccleuch Place
Edinburgh
EH8 9JT
United Kingdom
Tel: 011 44 131 650 8361
Fax: 011 44 131 650 4514
E-Mail: Mike.Elsby@ed.ac.uk

Ryan Michaels
Department of Economics
University of Michigan
250 Lorch Hall
Ann Arbor MI 48103
Tel: 734/476-9543
E-Mail: rmikes@umich.edu

Gary Solon
Department of Economics
Michigan State University
East Lansing, MI 48824-1038
Tel: 517/353-9933
Fax: 517/432-1068
E-Mail: solon@msu.edu
AB  - One of the strongest trends in recent macroeconomic modeling of labor market fluctuations is to treat unemployment inflows as acyclical.  This trend stems in large part from an influential paper by Shimer on "Reassessing the Ins and Outs of Unemployment," i.e., the extent to which increased unemployment during a recession arises from an increase in the number of unemployment spells versus an increase in their duration.  After broadly reviewing the previous literature, we replicate and extend Shimer's main analysis.  Like Shimer, we find an important role for increased duration.  But contrary to Shimer's conclusions, we find that even his own methods and data, when viewed in an appropriate metric, reveal an important role for increased inflows to unemployment as well.  This finding is further strengthened by our refinements of Shimer's methods of correcting for data problems and by our detailed examination of particular components of the inflow to unemployment.  We conclude that a complete understanding of cyclical unemployment requires an explanation of countercyclical inflow rates as well as procyclical outflow rates.
ER  -