NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Consequences of Long Term Unemployment: Evidence from Matched Employer-Employee Data

Katharine G. Abraham, John C. Haltiwanger, Kristin Sandusky, James Spletzer

NBER Working Paper No. 22665
Issued in September 2016
NBER Program(s):   EFG   LS

It is well known that the long-term unemployed fare worse in the labor market than the short-term unemployed, but less clear why this is so. One potential explanation is that the long-term unemployed are “bad apples” who had poorer prospects from the outset of their spells (heterogeneity). Another is that these bad outcomes are a consequence of their extended unemployment (state dependence). We use Current Population Survey data on unemployed individuals linked to wage records for the same people to distinguish between these explanations. The rich information on work histories provided by the wage records allows us to control for individual heterogeneity that could be affecting post-unemployment labor market outcomes. Even with these controls in place, we find that unemployment duration has a strongly negative effect on the likelihood of subsequent employment. This finding is inconsistent with the “bad apple” (heterogeneity) explanation for why the long-term unemployed fare worse than the short-term unemployed. We also find that longer unemployment durations are associated with lower subsequent earnings, though this is mainly attributable to the long-term unemployed having a lower likelihood of subsequent employment rather than to their having lower earnings once a job is found.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22665

Users who downloaded this paper also downloaded* these:
Katz and Krueger w22667 The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015
Marinescu and Rathelot w22672 Mismatch Unemployment and the Geography of Job Search
Di Maggio, Kermani, and Palmer w22638 How Quantitative Easing Works: Evidence on the Refinancing Channel
Abel and Deitz w22654 Underemployment in the Early Careers of College Graduates Following the Great Recession
Gabriel, Hearey, Kahn, and Vaughn w22668 Public School Quality Valuation Over the Business Cycle
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us