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Unemployment duration among immigrants and natives: unobserved heterogeneity in a multi-spell duration model

  • Raquel Carrasco

    ()

  • J. Ignacio García Pérez

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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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we086933.

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Date of creation: Dec 2008
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Handle: RePEc:cte:werepe:we086933
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  1. David Card, 2005. "Is the New Immigration Really so Bad?," Economic Journal, Royal Economic Society, vol. 115(507), pages F300-F323, November.
  2. 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., vol. 20(1), pages 39-54.
  3. Ridder, G. & Tunali, I., 1997. "Stratified Partial Likelihood Estimation," Papers 1997/17, Koc University.
  4. Anders Frederiksen & Bo E. Honoré & Luojia Hu, 2006. "Discrete Time Duration Models with Group-level Heterogeneity," Discussion Papers 05-008, Stanford Institute for Economic Policy Research.
  5. Hansen, Jörgen, 2000. "The Duration of Immigrants' Unemployment Spells: Evidence from Sweden," IZA Discussion Papers 155, Institute for the Study of Labor (IZA).
  6. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  7. 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.
  8. Heckman, James J, 1991. "Identifying the Hand of the Past: Distinguishing State Dependence from Heterogeneity," American Economic Review, American Economic Association, vol. 81(2), pages 75-79, May.
  9. 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, vol. 59(3), pages 313-334, March.
  10. 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.
  11. 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.
  12. Olympia Bover & Manuel Arellano & Samuel Bentolila, 2002. "Unemployment Duration, Benefit Duration and the Business Cycle," Economic Journal, Royal Economic Society, vol. 112(479), pages 223-265, April.
  13. Kalwij, Adriaan, 2001. "Individuals' Unemployment Experiences: Heterogeneity and Business Cycle Effects," IZA Discussion Papers 370, Institute for the Study of Labor (IZA).
  14. Jörgen Hansen & Magnus Lofstrom, 2010. "Immigrant Assimilation and Welfare Participation: Do Immigrants Assimilate Into or Out-of Welfare," Working Papers id:2647, eSocialSciences.
  15. Arne Uhlendorff & Klaus F. Zimmermann, 2014. "Unemployment Dynamics among Migrants and Natives," Economica, London School of Economics and Political Science, vol. 81(322), pages 348-367, 04.
  16. 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.
  17. Gianmarco I.P. Ottaviano & Giovanni Peri, 2006. "Rethinking the Effects of Immigration on Wages," NBER Working Papers 12497, National Bureau of Economic Research, Inc.
  18. J. Ignacio García Pérez, 2001. "Non-stationary job search when jobs are not forever: A structural estimation," Economics Working Papers 556, Department of Economics and Business, Universitat Pompeu Fabra.
  19. 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.
  20. Chiswick, Barry R, 1986. "Is the New Immigration Less Skilled Than the Old?," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 168-92, April.
  21. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  22. George J. Borjas & Lynette Hilton, 1995. "Immigration and the Welfare State: Immigrant Participation in Means- Tested Entitlement Programs," NBER Working Papers 5372, National Bureau of Economic Research, Inc.
  23. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, December.
  24. 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.
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