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Duration Dependence in the Exit Rate out of Unemployment in Belgium: Is It True or Spurious?

  • Cockx, Bart

    ()

    (Ghent University)

  • Dejemeppe, Muriel

    ()

    (Université catholique de Louvain)

On the basis of aggregate data for the early nineties, we analyse the determinants of unemployment duration for laid-off male workers in Wallonia (Belgium). Our results demonstrate that if ranking in recruitment occurs, the standard Mixed Proportional Hazard specification can be too restrictive, leading to an overstatement of the extent of true negative duration dependence. We conclude that negative duration dependence is largely spurious. We also decompose the time variation of the hazard in (unobserved) compositional and direct cyclical and seasonal effects. We find counter-cyclical variation in the quality of young workers, but none for the prime aged.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 632.

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Length: 31 pages
Date of creation: Nov 2002
Date of revision:
Publication status: published in: Journal of Applied Econometrics, 2005, 20 (1), 1-23
Handle: RePEc:iza:izadps:dp632
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  2. Abbring, J.H. & Berg, G.J. & Ours, J.C., 1994. "The anatomy of unemployment dynamics," Serie Research Memoranda 0024, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  3. d’Addio, Anna Cristina, 1998. "Unemployment Durations of French Young People," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  6. Baker, Michael & Melino, Angelo, 2000. "Duration dependence and nonparametric heterogeneity: A Monte Carlo study," Journal of Econometrics, Elsevier, vol. 96(2), pages 357-393, June.
  7. Abbring, Jaap H & van den Berg, Gerard J, 2007. "The Unobserved Heterogeneity Distribution in Duration Analysis," CEPR Discussion Papers 6219, C.E.P.R. Discussion Papers.
  8. Michael R. Darby & John C. Haltiwanger & Mark W. Plant, 1985. "Unemployment-Rate Dynamics and Persistent Unemployment Under Rational Expectations," NBER Working Papers 1558, National Bureau of Economic Research, Inc.
  9. Stephen W. Salant, 1977. "Search Theory and Duration Data: A Theory of Sorts," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 39-57.
  10. Jaap H. Abbring & Gerard J. van den Berg & Jan C. van Ours, 1997. "Business Cycles and Compositional Variation in U.S. Unemployment," Tinbergen Institute Discussion Papers 97-050/3, Tinbergen Institute.
  11. Cockx, Bart & Ridder, Geert, 1996. "Social employment of welfare recipients in Belgium: an evaluation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1996018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  14. Stephen Machin & Alan Manning, 1998. "The Causes and Consequences of Long-Term Unemployment in Europe," CEP Discussion Papers dp0400, Centre for Economic Performance, LSE.
  15. Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
  16. Berg, Gerard J. van den & Ours, Jan C. van, 1996. "Duration dependence and heterogeneity in French youth unemployment durations," Serie Research Memoranda 0044, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  17. Kalwij, Adriaan, 2001. "Individuals' Unemployment Durations over the Business Cycle," IZA Discussion Papers 369, Institute for the Study of Labor (IZA).
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  20. 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.
  21. Amemiya, Takeshi, 1981. "Qualitative Response Models: A Survey," Journal of Economic Literature, American Economic Association, vol. 19(4), pages 1483-1536, December.
  22. Geert Ridder, 1990. "The Non-Parametric Identification of Generalized Accelerated Failure-Time Models," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 167-181.
  23. Muriel Dejemeppe, 2005. "A Complete Decomposition of Unemployment Dynamics using Longitudinal Grouped Duration Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(1), pages 47-70, 02.
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  25. Michael Rosholm, 2001. "Cyclical variations in unemployment duration," Journal of Population Economics, Springer;European Society for Population Economics, vol. 14(1), pages 173-191.
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