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Persistencies in the Labour Market

  • Frijters, Paul

    ()

    (University of Queensland)

  • Lindeboom, Maarten

    ()

    (Vrije Universiteit Amsterdam)

  • van den Berg, Gerard J.

    ()

    (University of Bristol)

Using longitudinal income-tax registers, we study how past labour market outcomes affect current labour market transition rates. We focus on hysteresis effects of the durations and incidence of previous spells out of work. We estimate flexible multi-state Mixed Proportional Hazard specifications for transition rates between employment, unemployment, and welfare/non-participation. Our main finding is that after longer periods of employment with high income, individuals' transition rates from unemployment to employment increase. Longer periods of non-employment generally decrease future transition rates to work, and sometimes also from work. The quantitative magnitude of persistency and hysteresis effects on inequality is modest.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4025.

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Length: 43 pages
Date of creation: Feb 2009
Date of revision:
Publication status: forthcoming in: R&R Oxford bulletin of Economics and Statistics
Handle: RePEc:iza:izadps:dp4025
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  1. Cohen, Daniel, 1999. "Welfare Differentials Across French and US Labour Markets," CEPR Discussion Papers 2114, C.E.P.R. Discussion Papers.
  2. Arulampalam, Wiji, 2002. "State Dependence in Unemployment Incidence: Evidence for British Men Revisited," IZA Discussion Papers 630, Institute for the Study of Labor (IZA).
  3. Burgess, Simon & Propper, Carol & Rees, Hedley & Shearer, Arran, 2003. "The class of 1981: the effects of early career unemployment on subsequent unemployment experiences," Labour Economics, Elsevier, vol. 10(3), pages 291-309, June.
  4. Audra J. Bowlus & Jean-Marc Robin, 2004. "Twenty Years of Rising Inequality in U.S. Lifetime Labour Income Values," Review of Economic Studies, Oxford University Press, vol. 71(3), pages 709-742.
  5. Omori, Yoshiaki, 1997. "Stigma Effects of Nonemployment," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 394-416, April.
  6. Anna Christina D'Addio & Bo E. Honoré, . "Duration Dependence and Timevarying Variables in Discrete Time Duration Models," Economics Working Papers 2002-13, Department of Economics and Business Economics, Aarhus University.
  7. de Jong, Philip & Lindeboom, Maarten & van der Klaauw, Bas, 2006. "Screening Disability Insurance Applications," IZA Discussion Papers 1981, Institute for the Study of Labor (IZA).
  8. Van den Berg, Gerard J., 2000. "Duration Models: Specification, Identification, and Multiple Durations," MPRA Paper 9446, University Library of Munich, Germany.
  9. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  10. Anthony B. Atkinson & Wiemer Salverda, 2005. "Top Incomes In The Netherlands And The United Kingdom Over The 20th Century," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 883-913, 06.
  11. Lynch, Lisa M, 1989. "The Youth Labor Market in the Eighties: Determinants of Re-employment Probabilities for Young Men and Women," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 37-45, February.
  12. Choi, HwaJung & Shin, Donggyun, 2002. "Do past unemployment spells affect the duration of current unemployment?," Economics Letters, Elsevier, vol. 77(2), pages 157-161, October.
  13. Lindbeck, Assar, 1995. "Hazardous Welfare-State Dynamics," Working Paper Series 428, Research Institute of Industrial Economics.
  14. Lindeboom, M. & Van Der Berg, G.J., 1991. "Heterogeneity in Models for Bivariate Survival : the Importance of the Mixing Distribution," Papers 430, Groningen State, Institute of Economic Research-.
  15. Gregg, Paul, 2001. "The Impact of Youth Unemployment on Adult Unemployment in the NCDS," Economic Journal, Royal Economic Society, vol. 111(475), pages F626-53, November.
  16. Blau, David M, 1994. "Labor Force Dynamics of Older Men," Econometrica, Econometric Society, vol. 62(1), pages 117-56, January.
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