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The likelihood of receiving a callback for a job interview sharply declines with unemployment duration

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According to a recent report by the Congressional Budget Office, long-term
unemployment may “produce a self-perpetuating cycle wherein protracted spells of
unemployment heighten employers’ reluctance to hire those individuals, which in
turn leads to even longer spells of joblessness.” Policymakers and researchers
alike tend to believe that this adverse effect of a long spell of unemployment
undermines the smooth functioning of the labor market and entails large social
costs. Economists refer to the phenomenon as “negative duration dependence.”
In Duration Dependence and Labor Market Conditions: Theory and Evidence from a
Field Experiment (National Bureau of Economic Research Working Paper No. 18387),

authors Kory Kroft, Fabian Lange, and Matthew Notowidigdo confirm that
the likelihood of receiving a callback for a job interview sharply declines with
unemployment duration.

This effect is especially pronounced during the first eight months after becoming
unemployed. Their estimates suggest that this effect is quantitatively
important, and that duration dependence is stronger when jobs are relatively
abundant. These results imply that employers statistically discriminate against
workers with longer unemployment durations and that employer screening plays an
important role in generating duration dependence.

To study duration dependence, the authors submitted fictitious resumes to real,
online job postings in each of the 100 largest metropolitan areas in the United
States, and then tracked “callbacks” from employers for each submission. In
total, they “applied” to roughly 3,000 job postings in Sales, Customer Service,
Administrative Support, and Clerical job categories, submitting roughly 12,000
resumes. The resumes they created characterized the “applicant’s” employment
status and, if unemployed, the length of the current unemployment spell, which
ranged from 1 to 36 months and was randomly assigned. As a result, this
experiment directly uncovered duration dependence arising through employers’
beliefs about unemployed workers.

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