FOR BETTER OR FOR WORSE,BUT HOW ABOUT A RECESSION?

In light of the current economic crisis, we estimate hazard models of divorce to determine how state and national unemployment rates affect the likelihood of a divorce or separation. With data in the United States over the 1978–2008 period from the 1979 NLSY, we find some evidence indicating that a higher unemployment rate increases the risk of a marriage ending for couples in years 6–10 of marriage (suggesting counter‐cyclical divorce/separation probabilities) but has no significant effect for couples in years 1–5 of marriage and those married longer than 10 years. The estimates are generally stronger in magnitude when using national instead of state unemployment rates and when considering just divorces rather than the first observed divorce or separation. (JEL J12)     

Crime during the business cycle: urban–rural differences

Despite the abundant literature on how crime evolves over the business cycle, no consensus has arisen whether crime increases or decreases during recessions. The literature provides both positive and negative associations between the crime rate and the unemployment rate, a commonly used proxy for the business cycle. This study revisits this issue and uses county-level data from 1990 to 2013. It allows for differences as to how unemployment relates to both property crime and violent crime depending on the size of the counties. We find evidence of a positive association between unemployment and property crime that strengthens with county size. The results show the same pattern for violent crime but are statistically weaker. Our findings suggest that the positive association between property crime and unemployment that others have found is largely driven by more populous areas.     

Unemployment durations and local labour market conditions

ABSTRACT

Unemployment durations vary across local authority districts in the UK. We explore the extent to which this variation is explained by differences in local labour demand as opposed to composition, business cycle and regional effects. We use seventeen waves of the British Household Panel Survey to identify the determinants of the duration of unemployment spells. Once we adjust for individual-level, business cycle and regional controls, we do not find evidence that living in a local authority district with relatively high unemployment is associated with longer spells of unemployment. This indicates that differences in labour demand operate at larger geographic scales, such as between large regions. Our findings have implications for the design of policies to help high unemployment districts.     

FINANCIAL RISK AND UNEMPLOYMENT

There is a strong correlation between corporate interest rates, their spreads relative to Treasuries, and the unemployment rate. We model how corporate interest rates affect equilibrium unemployment and vacancies, in a Diamond–Mortesen–Pissarides search and matching model. Our simple model permits the exploration of U.S. business cycle statistics through the lens of financial shocks. We calibrate the model using U.S. data without targeting business cycle statistics. Volatility in the corporate interest rate can explain a quantitatively meaningful portion of the labor market. Data on corporate firms support the hypothesis that firms facing more volatile financial conditions have more volatile employment.     

Markov switching in disaggregate unemployment rates

We develop a dynamic factor model with Markov switching to examine secular and business cycle fluctuations in the U.S. unemployment rates. We extract the common dynamics amongst unemployment rates disaggregated for 7 age groups. The framework allows analysis of the contribution of demographic factors to secular changes in unemployment rates. In addition, it allows examination of the separate contribution of changes due to asymmetric business cycle fluctuations. We find strong evidence in favor of the common factor and of the switching between high and low unemployment rate regimes. We also find that demographic adjustments can account for a great deal of secular changes in the unemployment rates, particularly the abrupt increase in the 1970s and 1980s and the subsequent decrease in the last 18 years. First Version Received: December 2000/Final Version Received: June 2001     

Labor market dynamics over the business cycle: evidence from Markov switching models

This paper explores the evolution of the U.S. labor market across the business cycle and specifically the relationship between the unemployment rate and the average duration of unemployment. Labor market recoveries have long been thought of as lagging recoveries in broad economic activity. In particular, the unemployment rate peaks several months after official business cycle troughs and the average duration of unemployment lags further behind. Using estimates from Markov switching models of the unemployment rate, average duration of unemployment, jobless claims, and the exhaustion rate of regular unemployment insurance, this paper dates contractionary and expansionary phases of various aspects of the labor market and their relationship to the official phases of the business cycle. Evidence from these models suggests that inflows into unemployment recover almost contemporaneously with broad economic activity, while outflows recover almost a year after the end of official recessions. The differential timing in the recoveries of unemployment inflows and outflows, which is not a characteristic of most macro models of the labor market, accounts for the observed pattern between the unemployment rate and average duration of unemployment. Finally, when comparing the phases of the labor market to periods where Congress extends unemployment insurance benefits, it appears that policymakers target periods where the job finding rate is low, rather than periods where the stock of unemployed workers is high.     

Quarterly US unemployment: Cycles,seasons and asymmetries

This paper documents three stylized facts for the quarterly unemployment rate in the United States. Firstly, unemployment is asymmetric over the business cycle, i.e. it rises sharply in recessions and it falls slowly in expansions. Secondly, its seasonal fluctuations are not constant across the two business cycle stages in the sense that there is less seasonality in recession periods. Thirdly, the effect of shocks to the unemployment rate in expansions seem transitory, while this effect is permanent in recessions. Some implications of these stylized facts for empirical macroeconomics and seasonal adjustment are discussed.     

Transfers among divorced couples: evidence and interpretation

An analysis of the economic impact of divorce settlements in the United States is presented using data for a white cohort taken from the National Longitudinal Study of the High School Class of 1972. "The effects of spouses' incomes on the divorce transfer are estimated and used to simulate the welfare effects of divorce on husbands, wives, and children under alternative assumptions about marriage contracts and the ability of a couple to continue coordinating resources in the aftermath of divorce. We find a positive (negative) relationship between divorce transfers and the growth of husband's (wife's) earnings during marriage. The estimated expenditure on children in the divorce state is only half the accustomed level during marriage."     

Labor‐market Volatility in Matching Models with Endogenous Separations*

The business‐cycle behavior of a matching model with endogenous separations is studied in this paper. We show that whether aggregate productivity shocks have a larger effect on the vacancy–unemployment ratio than in a model with exogenous separations depends on whether worker productivity stochastically increases with tenure. The difference in the response is quantitatively small, however. We also show that the cleansing effect introduced by allowing for endogenous separations can help in reconciling the model with observed fluctuations in the unemployment rate, but not with those in the vacancy rate.     

Is fiscal policy always counter- (pro-) cyclical? The role of public debt and fiscal rules

We investigate the reaction of fiscal policy to the business cycle in a panel of 56 developed, emerging and developing economies over 1990–2011. While we strengthen the established finding that fiscal policy is counter-cyclical, additional outcomes emerge from this study. We reveal a non-linear response of fiscal policy to the business cycle, conditional upon the outstanding debt stock. Interestingly, when the public debt-to-GDP ratio goes beyond our endogenously estimated threshold of 87%, fiscal policy turns pro-cyclical. To tackle this effect, we explore the role of fiscal rules (FR). We unveil heterogeneous impacts among FR, as only some of them may mitigate fiscal policy procyclicality in high-debt contexts.     

Optimal monetary policy in a Phillips-curve world

In this paper, we study optimal monetary policy in a model that integrates the modern theory of unemployment with a liquidity model of monetary transmission. Two policy environments are considered: period-by-period optimization (time consistency) and full commitment (Ramsey allocation). When the economy is subject to productivity shocks, the optimal policy is pro-cyclical. We also characterize the long-term properties of monetary policy and show that with commitment the optimal inflation rate is inversely related to the bargaining power of workers. Both results find empirical support in the data.     

BUSINESS CYCLES AND ADMISSIONS TO SUBSTANCE ABUSE TREATMENT

We study the effect of business cycles on admissions to specialty substance abuse treatment using administrative data between 1992 and 2015. We proxy business cycles with the state unemployment rate and apply a panel fixed‐effects model. While previous economic research has shown that substance abuse is counter‐cyclical, we observe no change in the total number of admissions across the business cycle. However, focusing on average effects misses important heterogeneity. In substance‐specific regressions we find statistically significant evidence that heroin‐related admissions are counter‐cyclical while stimulant‐related admissions are procyclical. Our findings add to the literature on business cycles and health. (JEL I1, J2)     

我国财政政策作用机制与经济周期波动的相关性研究

我国积极财政政策在总需求管理过程中起到了重要作用.通过判断我国财政政策工具和财政政策规模与经济周期波动之间的关联,描述结构VAR模型中财政政策的作用和反馈过程,我们发现我国积极财政政策操作过程中体现出了一定程度的相机选择性和对经济周期阶段的依赖性,这意味着在我国经济增长已经出现"软扩张"的经济周期态势下,应当适当调整财政政策的期限结构和政策工具,加强货币政策的组合作用,继续保持积极财政政策对国内产出的作用方向.     

Unemployment insurance and the business cycle*

An equilibrium model is developed to study the interaction of the business cycle, unemployment insurance (UI), and the labor market for young men in Canada. The model combines optimal job offer, layoff, and recall decisions within a numerically solved and restricted Bayesian–Nash equilibrium. We consider the long‐run implications of changes made to unemployment insurance in Canada during the 1990s. The changes lead to equilibrium increases in average rates of unemployment, layoffs, and recalls. Eliminating UI lowers the equilibrium unemployment rate and average observed earnings. UI policy affects the timing of cycles of endogenous outcomes relative to the productivity cycle.     

Measuring the cyclicality of labour market flows using individual transitions

We investigate whether the choice of a business cycle measure affects estimates of the cyclicality of labour market flows. We exploit precise administrative data on individual labour market transitions and study the association of alternative business cycle measures with individual transitions between employment and unemployment. We find indeed substantial heterogeneities across business cycle indicators that may have affected the results of prior studies on labour market transitions.     

Unemployment durations and the pattern of duration dependence over the business cycle of British males

This paper examines the relationship between the business cycle and individuals’ duration in unemployment. I use multi-spell unemployment duration data of British males and monthly series of regional vacancies over unemployment, referred to as labour market tightness, to control for the business cycle. In line with most previous studies I find that the observed negative duration dependence on an aggregate level is explained by both sorting and strong negative individual duration dependence, and that the individual hazard of leaving unemployment increases with labour market tightness. The new empirical findings emerge from the interactions between individual duration dependence and the business cycle. Individual heterogeneity, and in particular the variation over the business cycle in the composition of the newly unemployed, explains most of the systematic variation over the business cycle in duration dependence on an aggregate level. Individual duration dependence does not vary over the business cycle in a way that would lend support to the predictions concerning this of the matching model of Lockwood (Rev Econ Stud 58:733–753, 1991) or the ranking model of Blanchard and Diamond (Rev Econ Stud 61:417–434, 1994).     

当前中国宏观经济分析--兼论现阶段中国经济周期的阶段

分析当前中国宏观经济形势,其实就是判断中国经济目前所处周期的阶段。但是,在实践中要区分周期的四个阶段或转折点,是极其困难的。本文从两个层次考察当前中国经济周期的阶段。首先是缺口理论、总需求－总供给（AS－AS）模型、IS－LM模型这几种工具的综合分析;其次分析GDP增长率、失业率、价格指数这些重要宏观经济变量。这些工具和变量中,最有价值的是产出缺口理论和价格指数。通过对这些工具和变量的分析,本文的最后结论是：当前中国经济确实了明显转机,出现了回升的系列迹象,正在步入复苏阶段,但并示真正稳定走出低谷或萧条。     

Evidence of the added-worker and discouraged-worker effects in Australia

Gross flow data for workers moving between the states of employment, unemployment and non-participation in Australia can be used to analyse the likelihood of workers transitioning between the three states in different phases of the business cycle. We use correlation analysis and a SVAR model to determine the cyclicality of state transition rates and use these results to characterise labour force inflows and outflows as being consistent in aggregate with either the discouraged-worker effect (DWE) or the added-worker effect (AWE). We find evidence that the AWE is dominant in transitions in both directions between unemployment and non-participation which contributes to a rise in unemployment during economic contractions. We also find that the DWE is dominant in transitions from non-participation to employment and that this drives the overall result that non-participation rises during a contraction. This means that the overall participation rate is procyclical. It is important to understand the cyclical influences on labour force participation and its interaction with unemployment before framing policy responses which seek to reduce labour market slack.     

The cyclicality of consumption,wages and employment of the public sector in the euro area

This study empirically examines the business cycle behaviour of public consumption and its main components, the public wage bill (including its breakdown into compensation per employee and public employment) and intermediate consumption, in the euro area aggregate, euro area countries and a group of selected non-euro area Organization for Economic Co-operation and Development (OECD) countries (Denmark, Sweden, the UK, Japan and the US). It looks across a large number of variables and methods, using annual data from 1960 to 2005. It finds robust evidence supporting that public consumption, wages and employment co-move with the business cycle in a pro-cyclical manner with 1–2 year lags, notably for the euro area aggregate and euro area countries. The findings reflect mainly the correlation between cyclical developments, but also point to an important role of pro-cyclical discretionary fiscal policies.     

Cyclical Asymmetries in Unemployment Rates: International Evidence

This paper investigates to what extent the observed nonlinearities in the unemployment rates of six major developed economies are the response to cyclical asymmetries. Two classes of models are compared: strict smooth transition autoregressions and models where the transition variable is GDP growth, which is considered a more direct indicator of the business cycle. The empirical evidence points out that nonlinearities in unemployment rates are induced by cyclical asymmetries. It is also found that in most countries the unemployment rate looks stationary and reverts to a long-run equilibrium rate in periods of normal growth, while in extreme cyclical situations it tends to become nonstationary as if each extreme cyclical episode had its own path of equilibrium.