Has the Great Recession Raised U.S. Structural Unemployment?

Author/Editor: Marcello M. Estevão ; Evridiki Tsounta
Publication Date: May 01, 2011
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Summary: The recent crisis has had differential effects across U.S. states and industries causing a wide geographic dispersion in skill mismatches and housing market performance. We document these facts and, using data from the 50 states plus D.C from 1991 to 2008, we present econometric evidence that supports that changes in state-level unemployment rates are linked to skill mismatches and housing market performance even after controlling for cyclical effects. This result suggests some causality going from mismatches and housing conditions to unemployment rates. The numerical estimates imply that the structural unemployment rate in 2010 was about 1¾ percentage points higher than before the onset of the housing market meltdown at end-2006. Reversing this increase may require targeted active labor market policies and measures to expedite the adjustment in housing markets, as our results suggest weak housing market conditions interact negatively with skill mismatches to produce higher unemployment rates in the United States.
Series: Working Paper No. 11/105
Frequency: Bimonthly
Subject(s): Economic models | Economic recession | Global Financial Crisis 2008-2009 | Labor markets | Unemployment

Author's Keyword(s): unemployment | skills mismatches | foreclosures
Publication Date: May 01, 2011
ISBN/ISSN: 9781455260409/1018-5941 Format: Paper
Stock No: WPIEA2011105 Pages: 46
US$18.00 (Academic Rate:
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