TY  - JOUR
AU  - Kroft,Kory
AU  - Lange,Fabian
AU  - Notowidigdo,Matthew J.
TI  - Duration Dependence and Labor Market Conditions: Theory and Evidence from a Field Experiment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18387
PY  - 2012
Y2  - September 2012
UR  - http://www.nber.org/papers/w18387
L1  - http://www.nber.org/papers/w18387.pdf
N1  - Author contact info:
Kory Kroft
Department of Economics and
School of Public Policy and Governance
University of Toronto
150 St. George Street
Toronto, ON M5S 3G7
E-Mail: kory.kroft@utoronto.ca

Fabian Lange
McGill University
Department of Economics
855 Sherbrooke Street West
Montreal, Quebec, H3A 2T7
E-Mail: fabolange@gmail.com

Matthew J. Notowidigdo
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-9758
E-Mail: noto@chicagobooth.edu
M2  - featured in NBER digest on 2013-03-01
AB  - This paper studies the role of employer behavior in generating "negative duration dependence" -- the adverse effect of a longer unemployment spell -- by sending fictitious resumes to real job postings in 100 U.S. cities.  Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker's unemployment spell, with the majority of this decline occurring during the first eight months.  We explore how this effect varies with local labor market conditions, and find that duration dependence is stronger when the labor market is tighter.  We develop a theoretical framework that shows how the sign of this interaction effect can be used to discern among leading models of duration dependence based on employer screening, employer ranking, and human capital depreciation.  Our results suggest that employer screening plays an important role in generating duration dependence; employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets.
ER  -