Thursday, April 28, 2011
I’m presenting some new work on unemployment at a conference at the University of Wisconsin this morning. I provide cross-country evidence on the relative importance of cyclical and structural factors in explaining unemployment, including the sharp rise in U.S. long-term unemployment during the Great Recession of 2007-09. About 75% of unemployment is accounted for by cyclical factors-real GDP changes (“Okun’s Law”), monetary and fiscal policies, and the uncertainty effects emphasized by Nick Bloom (Econometrica, 2009). Structural factors, which I measure using industry-level stock returns, account for the remaining 25 percent. For U.S. long-term unemployment the split between cyclical and structural factors is closer to 60-40, including during the Great Recession. Here’s my paper on cyclical and structural sources of unemployment and two related presentation slides (one and two).
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