Duration Dependence and Local Labor Market Conditions: Theory and Evidence from a Field Experiment

This paper studies “duration dependence”—the probability that a longer unemployment spell reduces a worker’s job opportunities —by sending fictitious resumes to real job postings across the U.S. We randomly manipulate the length of the current unemployment spell on each fictitious resume, and we track callbacks for interviews for all submissions. Preliminary results from the ongoing field experiment suggest that callbacks are strongly decreasing in unemployment duration. We develop a theoretical framework and show that it is possible to discern among leading models of duration dependence, based on employer screening, human capital depreciation and ranking, by exploring how duration dependence varies with labor market tightness. We find suggestive evidence that duration dependence tends to be stronger in labor markets with lower unemployment rates, suggesting that employer screening plays a relatively more important role in generating duration dependence. (JEL J64) 1E-mail: [email protected]; [email protected]; [email protected]. We thank Marianne Bertrand for helpful comments, and we thank Dan Zangri and Paul Ho for assisting in the design of the experiment. We are greateful to Thomas Bramlage, Rolando Capote, David Hampton, Aaron Meyer, Ben Smith, Stephanie Wu, and Vicki Yang for excellent research assistance. We gratefully acknowledge the Initiative on Global Markets at the University of Chicago Booth School of Business for financial support.