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Microeconomic analysis of unemployment persistence in Belgium

  • Amynah Vanessa Gangji
  • Robert Plasman

This study investigates the causes of unemployment persistence among the Belgian labour force. The underlying issue was to determine the impact of past unemployment spells on future labour market opportunities. Some European studies have demonstrated the existence of a true causal relationship between successive unemployment spells implying a stigmatisation effect for the unemployed. This so-called state dependence can occur through a reduction in human capital or through employer recruitment and labour retention practices. The model used is a dynamic random effects probit model controlling for unobserved heterogeneity and the initial condition problem. It was applied on the Panel Study on Belgian Households, covering the years 1994 to 2002. The results suggest that while observed and unobserved heterogeneity explain between 57% and 82% of unemployment persistence, the remainder is induced by the presence of state dependence. All else equal, an individual unemployed this year will be between 11.4 and 33 percentage points more likely to be unemployed next year as compared with an employed person. The presence of a stigmatisation effect of unemployment involves that the costs of unemployment are much higher than the simple loss of income and human capital associated to the current job loss. The study demonstrates the importance to concentrate the efforts on the prevention of unemployment.

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File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/8020/1/rp-0132.pdf
File Function: rp-0132
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Paper provided by ULB -- Universite Libre de Bruxelles in its series DULBEA Working Papers with number 07-20.RS.

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Length: 34 p.
Date of creation: 2007
Date of revision:
Publication status: Published by: DULBEA - Université libre de Bruxelles, Bruxelles
Handle: RePEc:dul:wpaper:07-20rs
Contact details of provider: Web page: http://difusion.ulb.ac.be

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  1. Guilkey, David K. & Murphy, James L., 1993. "Estimation and testing in the random effects probit model," Journal of Econometrics, Elsevier, vol. 59(3), pages 301-317, October.
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  11. Winter-Ebmer, Rudolf, 1991. "Some Micro Evidence on Unemployment Persistence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(1), pages 27-43, February.
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  15. Eric Cahuzac, 1998. "Past unemployment influences on the incidence of Belgian employees unemployment," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 159, pages 231-254.
  16. Wiji Arulampalam & Alison L. Booth, 2000. "Union status of young men in Britain: a decade of change," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 289-310.
  17. Winter-Ebmer, Rudolf & Zweimuller, Josef, 1992. "Do They Come Back Again? Job Search, Labour Market Segmentation and State Dependence as Explanations of Repeat Unemployment," Empirical Economics, Springer, vol. 17(2), pages 273-92.
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