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Unemployment duration among immigrants and natives: unobserved heterogeneity in a multi-spell duration model

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Raquel Carrasco ()
J. Ignacio García Pérez

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Abstract

This paper studies whether the unemployment dynamics of immigrants differ from those of natives, paying special attention to the impact of accounting for unobserved heterogeneity among individuals. Using a large administrative data set for Spain, we estimate multiple-spell discrete duration models which disentangle unobserved heterogeneity from duration dependence. Specifically, we estimate random effects models assuming that the distribution of the effects is discrete with finite support, and fixed effects models in which the distribution of the unobserved effects is left unrestricted. Our results show the importance of accounting for unobserved heterogeneity and that mistaken policy implications can be derived due to improper treatment of unmeasured variables. We find that lack of control for unobserved heterogeneity leads to the conclusion that immigrant males have a higher probability of leaving unemployment than natives and that the negative effect of unemployment benefits for immigrants lasts longer than for natives. Nonetheless, the estimates which do control for unobserved heterogeneity show the opposite results.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we086933.

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Date of creation: Dec 2008
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Handle: RePEc:cte:werepe:we086933

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Related research
Keywords: Duration models; Discrete choice; Multiple spells; Unobserved heterogeneity; Unemployment; Immigration;

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Find related papers by JEL classification:
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

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  1. Barry R. Chiswick & Yinon Cohen & Tzippi Zach, 1997. "The labor market status of immigrants: Effects of the unemployment rate at arrival and duration of residence," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 50(2), pages 289-303, January.
  2. J. Ignacio García Pérez, 2001. "Non-stationary Job Search when Jobs are not Forever: A Structural Estimation," Economics Working Papers 556, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  3. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
  4. Arne Uhlendorff & Klaus F. Zimmermann, 2006. "Unemployment Dynamics among Migrants and Natives," IZA Discussion Papers 2299, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. David Card, 2005. "Is the New Immigration Really so Bad?," Economic Journal, Royal Economic Society, vol. 115(507), pages F300-F323, November. [Downloadable!] (restricted)
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  6. Ridder, Geert & Tunali, Insan, 1999. "Stratified partial likelihood estimation," Journal of Econometrics, Elsevier, vol. 92(2), pages 193-232, October. [Downloadable!] (restricted)
    Other versions:
  7. Chiswick, Barry R, 1986. "Is the New Immigration Less Skilled Than the Old?," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 168-92, April. [Downloadable!] (restricted)
  8. Francine D. Blau, 1984. "The use of transfer payments by immigrants," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 37(2), pages 222-239, January.
  9. Olympia Bover & Manuel Arellano & Samuel Bentolila, 2002. "Unemployment Duration, Benefit Duration and the Business Cycle," Economic Journal, Royal Economic Society, vol. 112(479), pages 223-265, April. [Downloadable!] (restricted)
    Other versions:
  10. Jörgen Hansen & Magnus Lofstrom, 1999. "Immigrant Assimilation and Welfare Participation: Do Immigrants Assimilate Into or Out-of Welfare," IZA Discussion Papers 100, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  11. Robert J. LaLonde & Robert H. Topel, 1992. "The Assimilation of Immigrants in the U. S. Labor Market," NBER Chapters, in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 67-92 National Bureau of Economic Research, Inc. [Downloadable!]
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  12. Peri, Giovanni & Ottaviano, Gianmarco L. P., 2006. "Rethinking the Effects of Immigration on Wages," Working Papers 06-34, University of California at Davis, Department of Economics. [Downloadable!]
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  13. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, vol. 59(3), pages 313-334, March. [Downloadable!] (restricted)
  14. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December. [Downloadable!] (restricted)
  15. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54. [Downloadable!]
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  16. George J. Borjas, 2003. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1335-1374, November. [Downloadable!] (restricted)
    Other versions:
  17. Frederiksen, Anders & Honore, Bo E. & Hu, Luojia, 2007. "Discrete time duration models with group-level heterogeneity," Journal of Econometrics, Elsevier, vol. 141(2), pages 1014-1043, December. [Downloadable!] (restricted)
  18. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  19. Heckman, James J, 1991. "Identifying the Hand of the Past: Distinguishing State Dependence from Heterogeneity," American Economic Review, American Economic Association, vol. 81(2), pages 75-79, May. [Downloadable!] (restricted)
  20. Kalwij, Adriaan S., 2001. "Individuals' Unemployment Experiences: Heterogeneity and Business Cycle Effects," IZA Discussion Papers 370, Institute for the Study of Labor (IZA). [Downloadable!]
  21. Hansen, Jörgen, 2000. "The Duration of Immigrants' Unemployment Spells: Evidence from Sweden," IZA Discussion Papers 155, Institute for the Study of Labor (IZA). [Downloadable!]
  22. Chesher, Andrew & Lancaster, Tony, 1983. "The Estimation of Models of Labour Market Behavior," Review of Economic Studies, Blackwell Publishing, vol. 50(4), pages 609-24, October. [Downloadable!] (restricted)
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