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Testing for state dependence effects in a dynamic model of male unemployment behaviour

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  • Flaig, Gebhard
  • Licht, Georg
  • Steiner, Viktor

Abstract

A dynamic random effects probit model is estimated on the first six waves of the German Socio-Economic Panel to test for state dependence effects in male unemployment behaviour. Estimation of the model is based on the marginal likelihood approach. In the model an individual's unemployment probability at a given point in time within the period 1985 - 1989 depends on his labour force status in the previous period and on the cumulated duration of past unemployment. Controlling for observed and unobserved population heterogeneity, we show that there are strong state dependence effects in individual unemployment dynamics with respect to both the incidence and the duration of an individual's past unemployment. These results are compatible with the 'scar theory' of unemployment which holds that an individual's previous unemployment experience may have long-term effects because it induces a depreciation of human capital and/or acts as a screening device in employers hiring decisions. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 93-07.

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Date of creation: 1993
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Handle: RePEc:zbw:zewdip:9307

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  1. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  2. Heckman, James J & Borjas, George J, 1980. "Does Unemployment Cause Future Unemployment? Definitions, Questions and Answers from a Continuous Time Model of Heterogeneity and State Dependence," Economica, London School of Economics and Political Science, vol. 47(187), pages 247-83, August.
  3. Narendranathan, Wiji & Elias, Peter, 1993. "Influences of Past History on the Incidence of Youth Unemployment: Empirical Findings for the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(2), pages 161-85, May.
  4. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
  5. Gert G. Wagner & Jürgen Schupp & Ulrich Rendtel, 1991. "The Socio-Economic Panel (SOEP) for Germany - Methods of Production and Management of Longitudinal Data," Discussion Papers of DIW Berlin 31a, DIW Berlin, German Institute for Economic Research.
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Cited by:
  1. Mavromaras, Kostas G. & Sloane, Peter J. & Wei, Zhang, 2013. "The Scarring Effects of Unemployment, Low Pay and Skills Under-utilisation in Australia Compared," IZA Discussion Papers 7440, Institute for the Study of Labor (IZA).
  2. Kostas Mavromaras & Cain Polidano, 2011. "Improving the Employment Rates of People with Disabilities through Vocational Education," Melbourne Institute Working Paper Series wp2011n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  3. Martin Biewen, 2004. "Measuring State Dependence in Individual Poverty Status: Are there Feedback Effects to Employment Decisions and Household Composition?," Discussion Papers of DIW Berlin 429, DIW Berlin, German Institute for Economic Research.
  4. Niedergesäss, Markus, 2012. "Duration dependence, lagged duration dependence, and occurrence dependence in individual employment histories," University of Tuebingen Working Papers in Economics and Finance 26, University of Tuebingen, Faculty of Economics and Social Sciences.
  5. 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.
  6. Martin Biewen, 2009. "Measuring state dependence in individual poverty histories when there is feedback to employment status and household composition," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1095-1116.
  7. Paul Ryan, 2001. "The School-to-Work Transition: A Cross-National Perspective," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 34-92, March.
  8. Steiner, Viktor, 1993. "Long-term unemployment during the transition to a market economy: Eastern Germany after unification," ZEW Discussion Papers 93-14, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Steiner, Viktor, 1994. "Labour market transitions and the persistence of unemployment: West Germany 1983 - 1992," ZEW Discussion Papers 94-20, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. JOSE Ma ARRANZ & Juan Muro, 2004. "Recurrent unemployment, welfare benefits and heterogeneity," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(4), pages 423-441.
  11. Arne Uhlendorff, 2006. "From No Pay to Low Pay and Back Again?: A Multi-State Model of Low Pay Dynamics," Discussion Papers of DIW Berlin 648, DIW Berlin, German Institute for Economic Research.
  12. Maëlle Della Peruta & Dominique Torre, 2014. "Virtual Social Currencies for Unemployed People: Social Networks and Job Market Access," GREDEG Working Papers 2014-16, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  13. Amynah Vanessa Gangji & Robert Plasman, 2007. "Microeconomic analysis of unemployment persistence in Belgium," DULBEA Working Papers 07-20.RS, ULB -- Universite Libre de Bruxelles.
  14. Arulampalam, Wiji, 2002. "State Dependence in Unemployment Incidence: Evidence for British Men Revisited," IZA Discussion Papers 630, Institute for the Study of Labor (IZA).

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