Unemployment Behavior Evidence from the CPS Work Experience Survey

This paper discusses the nature and uses of data on individual unemployment experience available from the Current Population Survey (CPS). The purpose of the paper is two-fold: first, to describe the general statistical process generating such data and then to assume a specific, tractable, stochastic process by which the data could have been generated; and second, to carefully determine what, if anything, these data can tell us about the nature of unemployment. The conclusions from the empirical analysis are two: First, entry rates into unemployment and differences in entry rates across people are more important than spell exit rates for explaining unemployment during the year and levels of unemployment. Second, there appear to be some inconsistencies between inferences drawn from the experience data and those drawn from other data sets.