Wednesday, August 3, 2011

A Sub Component of Persistent Long-term Unemployment: Negative Duration Dependence Unemployment

Negative duration dependence unemployment is a rather strange phrase and a rather strange and hidden concept, to most people, regarding unemployment. However, the concept is worth examination when an economy such as the U.S. is experiencing long term persistent unemployment.

Negative duration dependence unemployment is basically a statistic that shows that the longer James or Jane Goodfellow have been unemployed the less likely James or Jane will land a job. Stated alternatively, the longer a workers is unemployed, a lower probability is present regarding the worker exiting the ranks of the unemployed. (1) (2)

Why? Seems rather counter intuitive. One would think that the unemployed worker has had plenty of time to study job openings, apply for positions, and interview for such positions. Wouldn’t all this effort, over time, make the worker more probable to land a job rather than less probable?

Some of the possible explanations regarding negative duration dependence unemployment are:

(1) the longer the worker is unemployed the worker tends to lose job skills,

(2) with lower job skills the offer for employment likely comes with a lower wage offer,

(3) with a lower wage offer the unemployed worker may opt to continue receiving unemployment benefits rather than accepting the lower wage offer,

(4) the longer the duration of unemployment means the longer away from the work force. The detachment form the work force can erode employment/job networks the unemployed worker once relied upon to help in job seeking,

(5) the longer the duration of unemployment may cause prospective employers to question the abilities of the workers i.e. is the prospective worker being passed over as he or she is the marginal worker. (2)


(1) The Rise in Long-term Unemployment, 2010 Federal Reserve Bank of Richmond publications, Hornstein and Lubik.

(2) The Causes and Consequences of Longterm Unemployment in Europe, 1999, Machin and Manning.

(3) The European Unemployment Dilemma, 1998, Ljungqvist and Sargent

1 comment:

  1. Some of the possible explanations regarding negative duration dependence unemployment are ...

    This is speculation without empirical support. What do the studies actually show, not for Europe, but for the USA?

    Other possible explanations include:
    1.A. Living on one income, rather than two, i.e., just being poorer.

    1.B. The other (former) wage-earner takes on more household and child-rearing tasks.

    2. Unrecorded income. Construction, mechanical maintenance, spot labor, all offer opportunities for cash work. Trade and exchange looks like buddies hanging out, but is labor for hire, only not perceived as such.

    3. Self-employment. (See above.) To the Republicans "self-employment" means becoming the CEO of a government-subsidized enterprise making solar panels or lithium batteries. Like 2. above, the activities are modest, but the attitude is major: you think of yourself differently, not just a day laborer.

    4. Liquidating assets. (See 2. and 3. above.) When a business unloads inventory that look different to the central planners than does selling stuff on eBay and Craig's List, but those are business actions, and some people figure that out, and act accordingly. Others are just happy to get cash money for things they no longer want or need.

    There are such statistical categories, but to tally them, you have to think in those terms. European central planners and their American cousins cannot imagine that an unemployed worker discovers that you do not need to punch a time clock in a factory to be gainfully employed at economic activity.