With low substitution, γ=8, the model reproduces these facts: a decrease in the labor force, an increase in unemployment, and a decrease in employment after the increase in the maximum duration of benefits.
States with a relatively large discouraged worker effect may have employment to labor force ratios increase even if employment is decreasing in a particular sector (assuming a relatively large discouraged worker effect leading to a decrease in the labor force).
A flash estimate for the first quarter shows a decrease in payroll employment of 20,300 on the previous quarter, when payroll employment fell 44,000.
He finds that while the first change led to a decrease in female employment and working hours (as the provision improved the bargaining position of women within marriages), the second change was associated with higher employment and working hours.
In the short term, however, increased competition is likely to result in shedding labor in some sectors and even a decrease in employment for the economy as a whole.
The argument also holds for a decrease in public employment, however, to a lesser extent and not for unemployment.
The resulting sharp decline in research funding and shrinkage of the previously dominant military industry have both contributed to a decrease in scientific employment.
Furthermore, an increase in EPL for temporary employment is significantly related to a decrease in temporary employment, which might also be expectable.
In this context it should be noted that in the first half of 2010, a rise in part-time working arrangements was statistically related to a decrease in full-time employment while the unemployment rate declined slightly [34, 35, 36].
Both Rothstein (2011) and Farber and Valletta (2013) find that the unemployment insurance extensions reduced exits from unemployment but that this was largely due to reductions in exits from the labor force rather than a decrease in exits to employment.
