Keywords: Hysteresis, employment persistence, panel data
Abstract: The recent U.S. expansion has provided employment experience to
individuals at tail of the skill distribution. Will these
opportunities bestow persistent benefits in the form of greater future
employability? Using synthetic cohorts constructed from the CPS, this
paper estimates the degree of persistence in cohort-level employment
rates in excess of persistence in aggregate macroeconomic conditions.
This approach is in some ways superior to testing for hysteresis in
the aggregate unemployment rate because it abstracts away from
compositional changes in the labor force by focusing on particular
demographic groups. After controlling for aggregate conditions, there
is little evidence of significant persistence in cohorts' employment
rates; the effects of aggregate shocks are essentially dissipated
within three years. However, economic conditions that prevailed when
the cohorts first entered the labor market significantly affect the
average lifetime employment rate of cohorts of less-educated men.
Full paper (189 KB PDF)
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Last update: June 12, 2001