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Unemployment Duration among Immigrants and Natives: Unobserved Heterogeneity in a Multi-Spell Duration Model

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Author Info

  • Raquel Carrasco

    ()
    (Departamento de Economía, Universidad Carlos III de Madrid)

  • José Ignacio García Pérez

    ()
    (Department of Economics, Universidad Pablo de Olavide)

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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File URL: http://www.upo.es/serv/bib/wps/econ0813.pdf
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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 08.13.

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Length: 47 pages
Date of creation: Dec 2008
Date of revision:
Handle: RePEc:pab:wpaper:08.13

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

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  1. Robert J. LaLonde & Robert H. Topel, 1990. "The Assimilation of Immigrants in the U.S. Labor Markets," NBER Working Papers 3573, National Bureau of Economic Research, Inc.
  2. Hansen, Jörgen & Löfström, Magnus, 2000. "Immigrant Assimilation And Welfare Participation: Do Immigrants Assimilate Into Or Out Of Welfare?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2430, C.E.P.R. Discussion Papers.
  3. Heckman, James J, 1991. "Identifying the Hand of the Past: Distinguishing State Dependence from Heterogeneity," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 75-79, May.
  4. 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., John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  5. 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, Cornell University, ILR School, vol. 50(2), pages 289-303, January.
  6. Borjas, George J & Hilton, Lynette, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(2), pages 575-604, May.
  7. Ridder, G. & Tunali, I., 1997. "Stratified Partial Likelihood Estimation," Papers, Koc University 1997/17, Koc University.
  8. Chesher, Andrew & Lancaster, Tony, 1983. "The Estimation of Models of Labour Market Behavior," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 50(4), pages 609-24, October.
  9. David Card, 2004. "Is the New Immigration Really So Bad?," CReAM Discussion Paper Series 0402, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  10. Uhlendorff, Arne & Zimmermann, Klaus F., 2006. "Unemployment Dynamics among Migrants and Natives," IZA Discussion Papers 2299, Institute for the Study of Labor (IZA).
  11. Francine D. Blau, 1984. "The use of transfer payments by immigrants," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 37(2), pages 222-239, January.
  12. Frederiksen, Anders & Honore, Bo E. & Hu, Luojia, 2007. "Discrete time duration models with group-level heterogeneity," Journal of Econometrics, Elsevier, Elsevier, vol. 141(2), pages 1014-1043, December.
  13. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 32(4), pages 1667-1717, December.
  14. 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, Elsevier, vol. 59(3), pages 313-334, March.
  15. Ottaviano, Gianmarco I. P. & Peri, Giovanni, 2007. "Rethinking the effects of immigration on wages," HWWI Research Papers, Hamburg Institute of International Economics (HWWI) 3-8, Hamburg Institute of International Economics (HWWI).
  16. Arellano, Manuel & Bentolila, Samuel & Bover, Olympia, 1998. "Unemployment Duration, Benefit Duration and the Business Cycle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1840, C.E.P.R. Discussion Papers.
  17. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  18. Hansen, Jörgen, 2000. "The Duration of Immigrants' Unemployment Spells: Evidence from Sweden," IZA Discussion Papers 155, Institute for the Study of Labor (IZA).
  19. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  20. Kalwij, Adriaan, 2001. "Individuals' Unemployment Experiences: Heterogeneity and Business Cycle Effects," IZA Discussion Papers 370, Institute for the Study of Labor (IZA).
  21. J. Ignacio García Pérez, 2001. "Non-stationary job search when jobs are not forever: A structural estimation," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 556, Department of Economics and Business, Universitat Pompeu Fabra.
  22. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number abow91-1.
  23. Chiswick, Barry R, 1986. "Is the New Immigration Less Skilled Than the Old?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 4(2), pages 168-92, April.
  24. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, Econometric Society, vol. 52(2), pages 271-320, March.
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Cited by:
  1. Álvarez de Toledo, Pablo & Núñez, Fernando & Usabiaga, Carlos, 2014. "An empirical approach on labour segmentation. Applications with individual duration data," Economic Modelling, Elsevier, Elsevier, vol. 36(C), pages 252-267.

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