Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics

Gertler, Mark; Huckfeldt, Christopher; Trigari, Antonella

doi:10.1257/aer.20220749

Abstract

We revisit the role of temporary layoffs in the business cycle. While some have emphasized a stabilizing effect due to recall hiring, we quantify from the data an important countercyclical destabilizing effect due to “loss-of-recall”, whereby workers in temporary-layoff unemployment lose their job permanently. We develop a quantitative model allowing for endogenous flows of workers across employment and both temporary-layoff and jobless unemployment. The model captures both pre- and post-pandemic unemployment dynamics, including the recessionary role of loss-of-recall. We use our structural model to show that the Paycheck Protection program generated sizable employment gains, in part by significantly reducing loss-of-recall.

American Economic Review

Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics

Abstract

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American Economic Review

Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics

Abstract

Downloads