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Duration Dependence in the Exit Rate out of Unemployment in Belgium: Is It True or Spurious?

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  • Cockx, Bart

    ()
    (Ghent University)

  • Dejemeppe, Muriel

    ()
    (Université catholique de Louvain)

Abstract

On the basis of aggregate data for the early nineties, we analyse the determinants of unemployment duration for laid-off male workers in Wallonia (Belgium). Our results demonstrate that if ranking in recruitment occurs, the standard Mixed Proportional Hazard specification can be too restrictive, leading to an overstatement of the extent of true negative duration dependence. We conclude that negative duration dependence is largely spurious. We also decompose the time variation of the hazard in (unobserved) compositional and direct cyclical and seasonal effects. We find counter-cyclical variation in the quality of young workers, but none for the prime aged.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 632.

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Length: 31 pages
Date of creation: Nov 2002
Date of revision:
Publication status: published in: Journal of Applied Econometrics, 2005, 20 (1), 1-23
Handle: RePEc:iza:izadps:dp632

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Keywords: unemployment duration; ranking; heterogeneity; business cycle;

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References

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  1. Baker, Michael, 1992. "Unemployment Duration: Compositional Effects and Cyclical Variability," American Economic Review, American Economic Association, vol. 82(1), pages 313-21, March.
  2. D’ADDIO, Anna Christina, 1998. "Unemployment durations of French young people," CORE Discussion Papers 1998051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
  4. Dynarski, Mark & Sheffrin, Steven M, 1990. "The Behavior of Unemployment Durations over the Cycle," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 350-56, May.
  5. Abbring, Jaap H & van den Berg, Gerard J & van Ours, Jan C, 1995. "The Anatomy of Unemployment Dynamics," CEPR Discussion Papers 1202, C.E.P.R. Discussion Papers.
  6. Jaap H. Abbring & Gerard J. van den Berg, 2006. "The Unobserved Heterogeneity Distribution in Duration Analysis," Tinbergen Institute Discussion Papers 06-059/3, Tinbergen Institute.
  7. Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-56, July.
  8. Gérard VAN DEN BERG & Gijsbert VAN LOMWEL & Jan VAN OURS, 2003. "Unemployment Dynamics and Age," Annales d'Economie et de Statistique, ENSAE, issue 70, pages 1-29.
  9. Darby, Michael R & Haltiwanger, John C & Plant, Mark W, 1985. "Unemployment Rate Dynamics and Persistent Unemployment under Rational Expectations," American Economic Review, American Economic Association, vol. 75(4), pages 614-37, September.
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  11. Kalwij, Adriaan, 2001. "Individuals' Unemployment Durations over the Business Cycle," IZA Discussion Papers 369, Institute for the Study of Labor (IZA).
  12. Michael Rosholm, 2001. "Cyclical variations in unemployment duration," Journal of Population Economics, Springer, vol. 14(1), pages 173-191.
  13. Cockx, Bart & Ridder, Geert, 2001. "Social Employment of Welfare Recipients in Belgium: An Evaluation," Economic Journal, Royal Economic Society, vol. 111(470), pages 322-52, April.
  14. Nickell, Stephen J, 1979. "Estimating the Probability of Leaving Unemployment," Econometrica, Econometric Society, vol. 47(5), pages 1249-66, September.
  15. Jaap H. Abbring & Gerard J. van den Berg & Jan C. van Ours, 1997. "Business Cycles and Compositional Variation in U.S. Unemployment," Tinbergen Institute Discussion Papers 97-050/3, Tinbergen Institute.
  16. Michael Baker & Angelo Melino, 1999. "Duration Dependence and Nonparametric Heterogeneity: A Monte Carlo Study," Working Papers melino-99-01, University of Toronto, Department of Economics.
  17. Gerard J. van den Berg & Jan C. van Ours, 1999. "Duration dependence and heterogeneity in French youth unemployment durations," Journal of Population Economics, Springer, vol. 12(2), pages 273-285.
  18. Stephen Machin & Alan Manning, 1998. "The causes and consequences of long-term unemployment in Europe," LSE Research Online Documents on Economics 20255, London School of Economics and Political Science, LSE Library.
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  23. Bart L. W. Cockx, 2000. "Analysis Of Transition Data By The Minimum-Chi-Square Method: An Application To Welfare Spells In Belgium," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 392-405, August.
  24. Muriel Dejemeppe & Yves Saks, 2002. "A New Light into Regional Unemployment Disparities in Belgium : Longitudinal Analysis of Grouped Duration Data," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  25. 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.
  26. repec:fth:louvco:9851 is not listed on IDEAS
  27. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
  28. Muriel Dejemeppe, 2005. "A Complete Decomposition of Unemployment Dynamics using Longitudinal Grouped Duration Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(1), pages 47-70, 02.
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Citations

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Cited by:
  1. Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
  2. Maes, Marjan, 2008. "Poverty persistence among Belgian elderly: true or spurious?," ISER Working Paper Series 2008-24, Institute for Social and Economic Research.
  3. Bruno, VAN DER LINDEN, 2005. "Equilibrium Evaluation of Active Labor Market Programmes Enhancing Matching Effectiveness," Discussion Papers (ECON - Département des Sciences Economiques) 2005007, Université catholique de Louvain, Département des Sciences Economiques.
  4. B. Cockx & M. Picchio, 2009. "Are Short-Lived Jobs Stepping Stones to Long-Lasting Jobs?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/560, Ghent University, Faculty of Economics and Business Administration.
  5. Adriaan Kalwij, 2010. "Unemployment durations and the pattern of duration dependence over the business cycle of British males," Empirical Economics, Springer, vol. 38(2), pages 429-456, April.
  6. Bemjamin Villena-Roldan, 2009. "Aggregate Implications of Employer Search and Recruiting Selection," 2009 Meeting Papers 97, Society for Economic Dynamics.
  7. Pieter Serneels, 2008. "Unemployment duration, job search and labour market segmentation Evidence from urban Ethiopia," CSAE Working Paper Series 2008-17, Centre for the Study of African Economies, University of Oxford.
  8. Marjan, MAES, 2008. "Poverty persistence among Belgian elderly in the transition from work to retirement : an empirical analysis," Discussion Papers (ECON - Département des Sciences Economiques) 2008042, Université catholique de Louvain, Département des Sciences Economiques.
  9. Niedergesäss, Markus, 2013. "Employment, partnership and childbearing decisions of German women and men: A simultaneous hazards approach," University of Tuebingen Working Papers in Economics and Finance 51, University of Tuebingen, Faculty of Economics and Social Sciences.
  10. Arntz, Melanie & Wilke, Ralf A., 2006. "Unemployment duration in Germany: individual and regional determinants of local job finding, migration and subsidized employment," ZEW Discussion Papers 06-92, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Cockx, Bart, 1999. "The Design of Active Labour Market Policies. What Matters and What Doesn't ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999035, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. Ana Luísa Abras & Fabiana de Felício, 2005. "Duração E Taxa De Saída Do Desemprego: Evidências De Ausência De Dependência Na Duração Para As Regiões Metropolitanas Do Brasil (1984-2000)," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] 169, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  13. Michal Franta, 2008. "Time Aggregation Bias in Discrete Time Models of Aggregate Duration Data," Working Papers 2008/10, Czech National Bank, Research Department.

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