Summary of Main Results and Outlook on Aggregate Unemployment

Abstract

This study is concerned with individual unemployment duration. Chapter II. reviewed the determination of individual unemployment duration in neoclassical labor supply theory and search theory. Chapter III. introduced hazard rate duration models and reviewed empirical findings from these models. In chapter IV. alternative empirical approaches for modeling unemployment duration and reservation wages were considered. Except for the time—series models with aggregate data considered briefly in chapter IV.1, this material also referred to individual duration models exploiting data sets on individual characteristics. In chapter V. the sample design for individual unemployment durations in the Socio—Economic Panel was considered and semi—parametric hazard rate models were constructed. These models were utilized to analyze the impact of socio-economic characteristics of interest on the probability of entering a new job and of leaving unemployment, respectively. The relevant variables for our models were discussed in chapter VI., and the results were presented in chapter VII. In the last chapter of this study I briefly summarize the main findings of the hazard rate analysis and show how the hazard rate framework can be utilized to connect individual unemployment durations with the steady state stock of aggregate unemployment. This analysis is simply “arithmetic” in that it translates given unemployment flows into unemployment stocks without considering the quality of an equilibrium.