Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?

28 Pages Posted: 4 Jul 2004 Last revised: 5 Sep 2022

See all articles by Christopher J. Flinn

Christopher J. Flinn

New York University -Leonard N. Stern School of Business - Department of Economics; IZA Institute of Labor Economics

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 1982

Abstract

This paper formulates and tests the hypothesis that the categories unemployed and out of the labor force are behaviorally distinct labor force states. Our empirical results indicate that they are. In the empirically relevant range the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment. This evidence is shown to be consistent with a simple job search model of productive unemployment with log concave wage offer distributions. We prove that if unemployed workers receive job offers more frequently than workers out of the labor force, and if wage offer distributions are log concave, the exit rate from unemployment to employment exceeds the exit rate from out of the labor force to employment.

Suggested Citation

Flinn, Christopher J. and Heckman, James J., Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States? (September 1982). NBER Working Paper No. w0979, Available at SSRN: https://ssrn.com/abstract=302557

Christopher J. Flinn (Contact Author)

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