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Post-Unemployment Wages and Economic Incentives to Exit from Unemployment


  • Kyyrä, Tomi


This study represents the results of a comparative econometric analysis of the determinants of earnings and unemployment durations. The analysis uses two sets of panel data, one drawn from the outflows of unemployment and another from the working age population. The earnings of people leaving unemployment are modelled in order to obtain estimates for starting wages in subsequent jobs. With these estimates, the expected income changes associated with labour market transitions are evaluated at the household level. Some 8% of the unemployed are estimated to be unable to increase disposable income of their households through employment, while as much as 43% have to be content with a 25% increase or less. The income variables, with controls for other factors, are then mapped into a flexible competing risks model of unemployment duration. The expected returns to employment are found to be an important determinant of the probability of becoming employed. It appears also that the relative importance of economic incentives has been strengthened in the recession years.

Suggested Citation

  • Kyyrä, Tomi, 1999. "Post-Unemployment Wages and Economic Incentives to Exit from Unemployment," Research Reports 56, VATT Institute for Economic Research.
  • Handle: RePEc:fer:resrep:56

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    References listed on IDEAS

    1. Fridstrøm, Lasse & Minken, Harald & Moilanen, Paavo & Shepherd, Simon & Vold, Arild, 2000. "Economic and Equity Effects of Marginal Cost Pricing in Transport," Research Reports 71, VATT Institute for Economic Research.
    2. Schade, Jens & Schlag, Bernhard, 2000. "Acceptability of Urban Transport Pricing," Research Reports 72, VATT Institute for Economic Research.
    3. Milne, David & Niskanen, Esko & Verhoef, Erik, 2000. "Operationalisation of Marginal Cost Pricing within Urban Transport," Research Reports 63, VATT Institute for Economic Research.
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    Cited by:

    1. D'Addio, Anna Cristina & De Greef, Isabelle & Rosholm, Michael, 2002. "Assessing Unemployment Traps in Belgium Using Panel Data Sample Selection Models," IZA Discussion Papers 669, Institute for the Study of Labor (IZA).
    2. Jan Saarela & Fjalar Finnäs, 2004. "Interethnic Wage Variation in the Helsinki Area," Finnish Economic Papers, Finnish Economic Association, vol. 17(1), pages 35-48, Spring.
    3. Tuomas Pekkarinen, 2001. "The wage curve : evidence from the Finnish metal industry panel data," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 51-60, Spring.
    4. Panu Poutvaara & Juha Tuomala, 2004. "What is Left to Residual Claimants? The Empirics of Income Reported by Entrepreneurs and Workers," Labor and Demography 0406001, EconWPA.
    5. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo Group Munich.
    6. Virve Ollikainen & Tomi Kyyrä, 2006. "To Search or Not to Search? The Effects of UI Benefit Extension for the Elderly Unemployed," Discussion Papers 400, Government Institute for Economic Research Finland (VATT).
    7. Uusitalo, Roope & Verho, Jouko, 2007. "The effect of unemployment benefits on re-employment rates: evidence from the Finnish UI-benefit reform," Working Paper Series 2007:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    8. Hakola, Tuulia & Lindeboom, Maarten, 2001. "Retirement Round-bout: Early Exit Channels and Disability Applications," Discussion Papers 262, VATT Institute for Economic Research.
    9. Hämäläinen, Kari, 2003. "Education and Unemployment: State Dependence in Unemployment Among Young People in the 1990s," Discussion Papers 312, VATT Institute for Economic Research.
    10. Hakola, Tuulia, 2000. "Navigating through the Finnish Pension System," Discussion Papers 224, VATT Institute for Economic Research.


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