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Anatomy of unemployment risk

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  • Carolina Fugazza

Abstract

This paper investigates the role of job separation and job finding probabilities in shaping the unemployment risk across ages and working characteristics. Improving on current methods, we estimate duration models for employment and unemployment, separately. We then use the duration analysis results to derive the individual age profiles of conditional transitions in and out of unemployment as well as the unconditional unemployment risk profile over the whole working life. This allows to adapt the decomposition of changes in unemployment risk so far used only in the study of aggregate unemployment dynamics (Shimer, 2007 and 2012; Fujita and Ramey, 2009). We find that differences in job separation rates across ages are at the root of the observed age differences in unemployment risk. When looking at differences between working groups, the job findings are just as important as job separation probability.

Suggested Citation

  • Carolina Fugazza, 2017. "Anatomy of unemployment risk," Carlo Alberto Notebooks 531, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:531
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    More about this item

    Keywords

    Unemployment Risk; Duration Analysis; Heterogeneity; Semi-Markov Processes.;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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