Labor Market Dynamics and Unemployment: A Reconsideration

Note: This research was supported by the U.S. Department of Labor and Harvard University, Graduate School of Business Administration, Division of Research. We want to thank James L. Buchal, Michael C. Burda, Edward Y. Fu, David G. Golden, Barbara C. Job, Judith E. Lebow, Robert J. McIntire, Morris J. Newman, James M. Poterba, and especially Daniel E. Smith for assistance in various stages of this project. Comments by members of the Brookings panel have led to significant improvements in this paper. 1. Many of these studies appear in Brookings Papers on Economic Activity. They include Robert E. Hall, "Turnover in the Labor Force," BPEA, 3:1972, pp. 709-56, and "Why Is the Unemployment Rate So High at Full Employment?" BPEA, 3:1970, pp. 369-402; George L. Perry, "Unemployment Flows in the U.S. Labor Market," BPEA, 2:1972, pp. 245-78; Ralph E. Smith, Jean E. Vanski, and Charles C. Holt, "Recession and the Employment of Demographic Groups," BPEA, 3:1974, pp. 737-58; Martin S. Feldstein, "The Importance of Temporary Layoffs: An Empirical Analysis," BPEA, 3:1975, pp. 725-44; and Stephen T. Marston, "Employment Instability and High Unemployment Rates," BPEA, 1:1976, pp. 169-203. Other papers include Martin S. Feldstein, Lowering the Permanent Rate of Un-