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Persistencies in the Labour Market

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Author Info

  • Frijters, Paul

    ()
    (University of Queensland)

  • Lindeboom, Maarten

    ()
    (VU University Amsterdam)

  • van den Berg, Gerard J.

    ()
    (University of Mannheim)

Abstract

Using longitudinal income-tax registers, we study how past labour market outcomes affect current labour market transition rates. We focus on hysteresis effects of the durations and incidence of previous spells out of work. We estimate flexible multi-state Mixed Proportional Hazard specifications for transition rates between employment, unemployment, and welfare/non-participation. Our main finding is that after longer periods of employment with high income, individuals' transition rates from unemployment to employment increase. Longer periods of non-employment generally decrease future transition rates to work, and sometimes also from work. The quantitative magnitude of persistency and hysteresis effects on inequality is modest.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4025.

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Length: 43 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4025

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Related research

Keywords: duration analysis; hysteresis; inequality; wages; unemployment; hazard rates; employment; income; work;

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References

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  1. Philip de Jong & Maarten Lindeboom & Bas van der Klaauw, 2011. "Screening Disability Insurance Applications," Journal of the European Economic Association, European Economic Association, vol. 9(1), pages 106-129, 02.
  2. Anna Christina D'Addio & Bo E. Honoré, . "Duration Dependence and Timevarying Variables in Discrete Time Duration Models," Economics Working Papers 2002-13, School of Economics and Management, University of Aarhus.
  3. Audra J. Bowlus & Jean-Marc Robin, 2004. "Twenty Years of Rising Inequality in U.S. Lifetime Labour Income Values," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 709-742.
  4. Lynch, Lisa M, 1989. "The Youth Labor Market in the Eighties: Determinants of Re-employment Probabilities for Young Men and Women," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 37-45, February.
  5. Van den Berg, Gerard J., 2001. "Duration models: specification, identification and multiple durations," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 55, pages 3381-3460 Elsevier.
  6. Omori, Yoshiaki, 1997. "Stigma Effects of Nonemployment," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 394-416, April.
  7. Gregg, Paul, 2001. "The Impact of Youth Unemployment on Adult Unemployment in the NCDS," Economic Journal, Royal Economic Society, vol. 111(475), pages F626-53, November.
  8. Burgess, Simon & Propper, Carol & Rees, Hedley & Shearer, Arran, 2003. "The class of 1981: the effects of early career unemployment on subsequent unemployment experiences," Labour Economics, Elsevier, vol. 10(3), pages 291-309, June.
  9. Cohen, Daniel, 1999. "Welfare Differentials Across French and US Labour Markets," CEPR Discussion Papers 2114, C.E.P.R. Discussion Papers.
  10. Lindeboom, M. & Van Der Berg, G.J., 1991. "Heterogeneity in Models for Bivariate Survival : the Importance of the Mixing Distribution," Papers 430, Groningen State, Institute of Economic Research-.
  11. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
  12. Arulampalam, Wiji, 2002. "State Dependence in Unemployment Incidence: Evidence for British Men Revisited," IZA Discussion Papers 630, Institute for the Study of Labor (IZA).
  13. Anthony B. Atkinson & Wiemer Salverda, 2005. "Top Incomes In The Netherlands And The United Kingdom Over The 20th Century," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 883-913, 06.
  14. Lindbeck, Assar, 1995. "Hazardous Welfare-State Dynamics," American Economic Review, American Economic Association, vol. 85(2), pages 9-15, May.
  15. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January.
  16. Choi, HwaJung & Shin, Donggyun, 2002. "Do past unemployment spells affect the duration of current unemployment?," Economics Letters, Elsevier, vol. 77(2), pages 157-161, October.
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Cited by:
  1. Stewart, Mark, 2006. "The Inter-related Dynamics of Unemployment and Low-Wage Employment," The Warwick Economics Research Paper Series (TWERPS) 741, University of Warwick, Department of Economics.

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