Volume 27, Number 2 (Spring) 1992
Gönül, Füsun. 1992. "New Evidence on Whether Unemployment and Out of the Labor Force are Distinct States." Journal of Human Resources 27(2):329-361.
This paper focuses on the question of whether people who are out of the labor force (OLF) should be included in unemployment measures. If people who are OLF can obtain jobs as often as the people who are unemployed, then there is no real distinction between the two states of nonemployment. Surprisingly, there has been very little effort surrounding this issue in the past: Clark and Summers (1982) conclude that for teenagers, unemployment and OLF are not distinct states, while Flinn and Heckman (1982a) find the opposite for white male high school graduates. The methodology adopted in this paper enables one to use incomplete transition data on unemployment and OLF, and to obtain estimates of the full transition matrix between three labor force states that are not possible with standard methods. New evidence for high school graduates is presented by gender, and it is found that, while for young women the two states are distinct, for young men they are not.
The author is a professor in the Graduate School of Industrial Administration, Carnegie Mellon University and a fellow of the Economics Research Center at the National Organizational Research Council, University of Chicago. She thanks her dissertation advisors, Randall J. Olsen, Donald O. Parsons, and two anonymous referees for their comments. She also benefitted from comments by Mark C. Berger, Lisa Lynch, and participants in the University of Chicago, the Ohio State University, Pennsylvania State University, and University of California, Davis workshops. Tracie Stufft and Brian Woyt provided valuable assistance in editing the draft. Computer support has been provided by the Pittsburgh Supercomputer Center and NSF N. SES-88009P.
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