TY - JOUR AU - Bils,Mark AU - Chang,Yongsung AU - Kim,Sun-Bin TI - Comparative Advantage in Cyclical Unemployment JF - National Bureau of Economic Research Working Paper Series VL - No. 13231 PY - 2007 Y2 - July 2007 UR - http://www.nber.org/papers/w13231 L1 - http://www.nber.org/papers/w13231.pdf N1 - Author contact info: Mark Bils Department of Economics University of Rochester Rochester, NY 14627 Tel: 585/275-0488 Fax: 585/256-2309 E-Mail: bils@troi.cc.rochester.edu Yongsung Chang Department of Economics University of Rochester Rochester, NY 14627 Tel: 1-585-275-1871 Fax: 1-585-256-2309 E-Mail: ychang14@mail.rochester.edu Sun-Bin Kim Department of Economics Yonsei University 134 Shinchon-dong Seodaemoon-gu Seoul Korea, 120-749 Tel: 82-2-2123-2467 E-Mail: sunbin.kim@yonsei.ac.kr AB - 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. ER -