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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 School of Economics and Finance, Queensland University of Technology in its series School of Economics and Finance Discussion Papers and Working Papers Series with number 087a.

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Date of creation: 15 Jun 2000
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Handle: RePEc:qut:dpaper:087a

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Postal: GPO Box 2434, BRISBANE QLD 4001
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Web page: http://www.bus.qut.edu.au/faculty/economics/
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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
• J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
• C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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1. de Jong, Philip & Lindeboom, Maarten & van der Klaauw, Bas, 2006. "Screening Disability Insurance Applications," IZA Discussion Papers 1981, Institute for the Study of Labor (IZA).
   
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   • de Jong, Philip & Lindeboom, Maarten & van der Klaauw, Bas, 2006. "Screening disability insurance applications," Working Paper Series 2006:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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.
   
   • Anna Cristina D'Addio & Bo E. Honoré, 2002. "Duration dependence and time varying variables in discrete time duration models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 D6-3, International Conferences on Panel Data.
3. 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.
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   • Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
6. Audra J. Bowlus & Jean-Marc Robin, 2004. "Twenty Years of Rising Inequality in U.S. Lifetime Labour Income Values," Review of Economic Studies, Wiley Blackwell, vol. 71, pages 709-742, 07.
   
   • Audra J, Bowlus & Jean-Marc Robin, 2002. "Twenty Years of Rising Inequality in US Lifetime Labor Income Values," Working Papers 2002-58, Centre de Recherche en Economie et Statistique.
7. 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.
   
   • Van den Berg, Gerard J., 2000. "Duration Models: Specification, Identification, and Multiple Durations," MPRA Paper 9446, University Library of Munich, Germany.
8. Lindbeck, Assar, 1995. "Hazardous Welfare-State Dynamics," American Economic Review, American Economic Association, vol. 85(2), pages 9-15, May.
9. 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.
10. Omori, Yoshiaki, 1997. "Stigma Effects of Nonemployment," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 394-416, April.
11. 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.
12. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January.
13. Arulampalam, Wiji, 2002. "State Dependence in Unemployment Incidence: Evidence for British Men Revisited," IZA Discussion Papers 630, Institute for the Study of Labor (IZA).
14. 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.
15. 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-.
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Cited by:

1. Mark B. Stewart, 2007. "The interrelated dynamics of unemployment and low-wage employment," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(3), pages 511-531.
   
   • 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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