Estimating Hysteresis Effects

In this paper we identify demand shocks that can have a permanent effect on output through hysteresis effects. We call these shocks. They are found to be quantitatively important in the United States, particular when Great Recession is included sample. Recessions driven by lead decline employment and investment, while per worker largely unaffected. find strong evidence transmits rise long-term unemployment labor force participation disproportionately affects least productive workers.