Reassessing the heterogeneity hypothesis in unemployment dynamics

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2015-4

Author

Ulucan, Hakan
Ercan, Hakan
Tümen, Semih

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Investigation of the sources of unemployment fluctuations has been a longstanding research objective. This line of research has attracted a great attention recently, because, as Shimer (2012) has confirmed that the celebrated Mortensen-Pissarides equilibrium search and matching model fails to explain the observed unemployment fluctuations for the USA. The aim of this study is to reexamine the flows into/out of unemployment by following Sider (1985) and Baker (1992) in order to find out whether Shimer’s results are still valid from a different perspective. Using the 1996–2012 data, we show that the heterogeneity hypothesis is still rejected but the degree of co-movement between the rate of unemployment and the aggregate expected duration is somewhat weaker, which casts doubt on Shimer’s conclusions.

Subject Keywords

Heterogeneity hypothesis, Unemployment duration, Business cycles

URI

http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/748
https://hdl.handle.net/11511/58243

Journal

ODTÜ Gelişme Dergisi

Collections

Department of Economics, Article

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Citation Formats

H. Ulucan, H. Ercan, and S. Tümen, “Reassessing the heterogeneity hypothesis in unemployment dynamics,” ODTÜ Gelişme Dergisi, vol. 42, no. 1, pp. 111–128, 2015, Accessed: 00, 2020. [Online]. Available: http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/748.