Why Do Long-Term Unemployed Workers Struggle to Find New Jobs?

Abstract: The job finding probabilities of workers who just lost their jobs are higher than for those who have been unemployed for several months. There are two broad reasons why this is the case: Either the job finding probabilities of workers decrease with unemployment duration, or workers differ in how quickly they can find jobs. Using an economic model and Austrian social security data on unemployment duration of workers, we estimate the importance of these two channels. We find that the latter is more important, especially in explaining a sharp decline in the job finding probability during the first six months of unemployment.

Keywords: unemployment; heterogeneity; structural unemployment;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2023-04

Volume: 23

Issue: 10