NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Comparative Advantage in Cyclical Unemployment

Mark Bils, Yongsung Chang, Sun-Bin Kim

NBER Working Paper No. 13231
Issued in July 2007
NBER Program(s):   EFG

We introduce worker differences in labor supply, reflecting differences in skills and assets, into a model of separations, matching, and unemployment over the business cycle. Separating from employment when unemployment duration is long is particularly costly for workers with high labor supply. This provides a rich set of testable predictions across workers: those with higher labor supply, say due to lower assets, should display more procyclical wages and less countercyclical separations. Consequently, the model predicts that the pool of unemployed will sort toward workers with lower labor supply in a downturn. Because these workers generate lower rents to employers, this discourages vacancy creation and exacerbates the cyclicality of unemployment and unemployment durations. We examine wage cyclicality and employment separations over the past twenty years for workers in the Survey of Income and Program Participation (SIPP). Wages are much more procyclical for workers who work more. This pattern is mirrored in separations; separations from employment are much less cyclical for those who work more. We do see for recessions a strong compositional shift among those unemployed toward workers who typically work less.

download in pdf format
   (570 K)

email paper

This paper is available as PDF (570 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13231

Users who downloaded this paper also downloaded these:
Bils, Chang, and Kim w15030 Comparative Advantage and Unemployment
Bils, Chang, and Kim w15166 Heterogeneity and Cyclical Unemployment
Elsby, Michaels, and Solon w12853 The Ins and Outs of Cyclical Unemployment
Harrigan and Deng w13963 China's Local Comparative Advantage
Chetty, Guren, Manoli, and Weber w16729 Does Indivisible Labor Explain the Difference Between Micro and Macro Elasticities? A Meta-Analysis of Extensive Margin Elasticities
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us