Heterogeneity and Unemployment Duration

Abstract

Various unemployment duration models are estimated on a large Norwegian dataset covering labour market history 1. 1.1989-31.12.1992 for all persons who became unemployed during October 1990. As many unemployed leave the unemployment register without going directly to a job, two alternative definitions of unemployment are usedregister unemployment and joblessness. The problem of heterogeneity is addressed both by partitioning the individuals into four categories by previous unemployment history, and by including a random term in the job hazard. Observed as well as unobserved heterogeneity affects the estimates of expected duration to a great extent. When gamma-distributed unobserved heterogeneity is accounted for, the estimates of duration dependence become more positive relative to models where unobserved heterogeneity is ignored. Among persons who are entitled to unemployment benefit, the duration dependence appears to be significantly positive. Alternative specifications of the baseline hazard hardly affect estimates of the effects of the covariates on duration.

Temporary layoffs and the duration of unemployment

“…The evidence on this point is mixed. While US and UK studies typically provide benefit elasticity estimates (the elasticity of unemployment duration with respect to the level of the unemployment benefit) ranging from 0.2 to 0.9 (Moffitt, 1985;Narendranathan et al, 1985;Katz and Meyer, 1990;Meyer, 1990;Card and Levine, 1998), European elasticity estimates differ widely, from virtually zero (Hujer and Schneider, 1989;Groot, 1990;van den Berg, 1990;Steiner, 1990;Hernaes and Strøm, 1996) to above unity (Abbring et al, 1998;Carling et al (1999).…”

The labour supply of low-skilled – incentives in the unemployment insurance systems

“…Based on European data, significant benefit level effects on the exit rate from unemployment have been hard to establish (van den Berg 1990, Hunt 1995. In recent years there have been a number of Scandinavian contributions to the literature on this research issue (Among many others: Hernaes and Strøm 1996, Carling et al 2001, Røed and Zang 2003. These studies tend to substantiate that higher benefits reinforces the disincentive effects of UI.…”

Does unemployment cause unemployment? Micro evidence from Norway

“…To our knowledge, there are four previous studies that focus directly on duration dependence in the Norwegian labour market (Aaberge, 1987(Aaberge, , 1996Rù nsen et al, 1993;Hernñ s and Strù m, 1996), but no clear conclusion emerges from these papers. The most recent and comprehensive study (Hernñ s and Strù m, 1996) demonstrates that the estimated degree of duration dependence is highly sensitive, both to the way states are de® ned (aggregated) and to the incorporation of unobserved heterogeneity.…”

“…The most recent and comprehensive study (Hernñ s and Strù m, 1996) demonstrates that the estimated degree of duration dependence is highly sensitive, both to the way states are de® ned (aggregated) and to the incorporation of unobserved heterogeneity.…”