Employment Duration and Match Quality over the Business Cycle

Abstract      

This paper studies the cyclical behaviour of employment duration using data from the National Longitudinal Survey of Youth 1979 cohort. We estimate a proportional hazard model with competing risks, distinguishing different types of separations. A higher unemployment rate at the start of an employment relationship increases the probability of job-to-job transitions, while its effect on employment-to-unemployment transitions is close to zero. We find similar patterns when we distinguish the separations by different reasons and contrast quits and firings. We then build a simple job-ladder model to interpret our empirical results. The cyclical behavior of opportunities for job-to-job transitions play an important role in the cyclical behaviour of match quality.