Joblessness

Abstract

The U.S. labor market has been experiencing unprecedented high average unemployment duration. The shift in the unemployment duration distribution can be traced back to the early nineties. In this paper, censored quantile regression methods are employed to analyze the changes in the US unemployment duration distribution. We explore the decomposition method proposed by Machado and Mata (2005) to disentangle the contribution of compositional vis-à-vis structural changes. The data used in this inquiry are taken from the nationally representative Displaced Worker Surveys of 1988 and 2008. Apart from the effect of economic improvement we find that the sensitivity of joblessness duration to education and the aging of the population were the two main forces behind the increase of the unemployment duration, in the last twenty years. We tentatively argue that firms use education as a signaling device during recessions, but the signaling power of education during the recent low-unemployment environment faded significantly.