January 1st, 2014
By Shigeru Fujita - Federal Reserve Bank of Philadelphia and Giuseppe Moscarini - Yale University and NBER
Unemployment is commonly understood to be a state of job search, and is measured accordingly. Due to informational imperfections, jobless individuals do not immediately find the kind of employment that they desire. One leading interpretation of these search frictions is that jobs and workers are extremely heterogeneous, so unemployed workers need time and effort to locate and arrange suitable jobs. The relevant dimensions of job heterogeneity include pay, schedule, location, task, work environment, and many others. If, however, a worker who separates from an employer and goes through a jobless spell eventually returns to work there, then much of this heterogeneity may be irrelevant, since the employer and employee already know what to expect from one another.
Using data from the Survey of Income and Program Participation (SIPP), we document that recalls of former employees in the U.S. labor market are surprisingly common: Over 40% of the employed workers who separate into unemployment return, after the jobless spell, to their last employer.
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