Some Like It Hot: Assessing Longer-Term Labor Market Benefits from a High-Pressure Economy
Julie L. Hotchkiss and Robert E. Moore
Working Paper 2018-1b
June 2018 (Revised October 2018)
This paper explores evidence for positive hysteresis in the labor market. Using data from the National Longitudinal Surveys of Youth, we find that negative labor market outcomes during high unemployment periods are mitigated by exposure to a high-pressure economy during the preceding expansion. Breaking total exposure into intensity and duration suggests that these two dimensions have differing impacts. However, the benefits of exposure are not enough to overcome the greater negative impact of high unemployment periods on labor market outcomes of disadvantaged groups, making extension of high-pressure economic environments ineffective in reducing labor market gaps.
JEL classification: E60, E24, J64, J31
Key words: hysteresis, unemployment, labor market gaps, labor force participation, wage gaps