Household Level Economic Incentives, Unemployment Trap and Job Finding Probability
This paper considers the sensitivity of the household's disposable income with respect to the labour market states and the labour market transitions of unemployed workers. The paper analyses the following questions: (i) which are the determinants of starting wages? (ii) how many unemployed are in the unemployment trap? (iii) how do household level economic incentives affect the conditional probability of finding a job? The empirical analysis is based on individual panel data covering the years 1987–1993 in Finland, when the unemployment rate rose from about 4% to 18%. We have estimated the starting wage equation to calculate the effects of hypothetical re-employment on the household's disposable income and to evaluate the frequency of the unemployment trap. To analyse factors affecting the transition out of unemployment to employment in open labour market, we estimate unemployment duration using a semi-parametric proportional risk model. The paper shows that the impact of the economic incentives, measured by the hypothetical change in household disposable income, on employment is more important in the recession than in the boom. Copyright Kluwer Academic Publishers 1999
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
- van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 255-77, April.
- Bruce D. Meyer, 1988.
"Unemployment Insurance And Unemployment Spells,"
NBER Working Papers
2546, National Bureau of Economic Research, Inc.
- Narendranathan, W. & Stewart, M.B., 1989. "Modelling The Probability Of Leaving Unemployment: Competing Risks Models With Flexible Baseline Hazards," The Warwick Economics Research Paper Series (TWERPS) 331, University of Warwick, Department of Economics.
- Arulampalam, Wiji & Stewart, Mark B, 1995. "The Determinants of Individual Unemployment Durations in an Era of High Unemployment," Economic Journal, Royal Economic Society, vol. 105(429), pages 321-32, March.
- Moffitt, Robert, 1993. "Identification and estimation of dynamic models with a time series of repeated cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 99-123, September.
- Green, David A & Riddell, W Craig, 1997. "Qualifying for Unemployment Insurance: An Empirical Analysis," Economic Journal, Royal Economic Society, vol. 107(440), pages 67-84, January.
- Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-68, September.
- Narendranathan, W & Nickell, S & Stern, J, 1985. "Unemployment Benefits Revisited," Economic Journal, Royal Economic Society, vol. 95(378), pages 307-29, June.
- 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.
- Chesher, Andrew D, 1984. "Testing for Neglected Heterogeneity," Econometrica, Econometric Society, vol. 52(4), pages 865-72, July.
- Chesher, Andrew & Lancaster, Tony, 1983. "The Estimation of Models of Labour Market Behavior," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 609-24, October.
- Reija Lilja, 1993. "Unemployment benefit system and unemployment duration in Finland," Finnish Economic Papers, Finnish Economic Association, vol. 6(1), pages 25-37, Spring.
When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:6:y:1999:i:3:p:361-378. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.