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Estimating the Latent Effect of Unemployment Benefits on Unemployment Duration

  • Lo, Simon M.S.

    ()

    (Lingnan University)

  • Stephan, Gesine

    ()

    (Institute for Employment Research (IAB), Nuremberg)

  • Wilke, Ralf

    ()

    (University of York)

We estimate the effect of a shortening of unemployment benefit entitlements on unemployment duration. Previous studies on the same or related problems have not taken into account that the competing risks duration model is not identified and we shed first light on the question whether the non identification problem may preclude informative results. It turns out that the identification bounds for the parameters of interest are very wide in the absence of strong assumptions. We suggest an assumption on the dependence structure between risks which is milder than what conventional duration models assume. Under this assumption, the identification bounds are tighter and become informative for the direction of the treatment effect. We find evidence that the unemployed with higher pre-unemployment earnings are more likely to enter full-time employment and, in particular, subsidized self-employment.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6650.

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Length: 35 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6650
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  1. Lo, Simon M. S. & Wilke, Ralf A., 2009. "A copula model for dependent competing risks," FDZ Methodenreport 200902_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Rivest, Louis-Paul & Wells, Martin T., 2001. "A Martingale Approach to the Copula-Graphic Estimator for the Survival Function under Dependent Censoring," Journal of Multivariate Analysis, Elsevier, vol. 79(1), pages 138-155, October.
  3. Johannes F. Schmieder & Till M. von Wachter & Stefan Bender, 2012. "The Effects of Extended Unemployment Insurance over the Business Cycle: Evidence from Regression Discontinuity Estimates Over Twenty Years," NBER Working Papers 17813, National Bureau of Economic Research, Inc.
  4. Dale T. Mortensen, 1977. "Unemployment insurance and job search decisions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 30(4), pages 505-517, July.
  5. Sokbae 'Simon' Lee & Ralf A. Wilke, 2005. "Reform of unemployment compensation in Germany: a nonparametric bounds analysis using register data," CeMMAP working papers CWP02/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. Dlugosz, Stephan & Stephan, Gesine & Wilke, Ralf A., 2009. "Fixing the leak: Unemployment incidence before and after the 2006 reform of unemployment benefits in Germany," IAB Discussion Paper 200925, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  7. Fitzenberger, Bernd & Osikominu, Aderonke & Völter, Robert, 2005. "Imputation rules to improve the education variable in the IAB employment subsample," FDZ Methodenreport 200503_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Simon M.S. Lo & Ralf A. Wilke, . "A Regression Model for the Copula Graphic Estimator," Discussion Papers 11/04, University of Nottingham, School of Economics.
  9. Wichert, Laura & Wilke, Ralf A., 2010. "Which factors safeguard employment? : An analysis with misclassified German register data," FDZ Methodenreport 201011_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  10. van den Berg, Gerard J, 1990. "Nonstationarity in Job Search Theory," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 255-77, April.
  11. Arntz, Melanie & Lo, Simon M. S. & Wilke, Ralf A., 2007. "Bounds analysis of competing risks : a nonparametric evaluation of the effect of unemployment benefits on migration in Germany," FDZ Methodenreport 200704_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  12. Jan C. van Ours & Milan Vodopivec, 2006. "How Shortening the Potential Duration of Unemployment Benefits Affects the Duration of Unemployment: Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 24(2), pages 351-378, April.
  13. Peng, Limin & Fine, Jason P., 2009. "Competing Risks Quantile Regression," Journal of the American Statistical Association, American Statistical Association, vol. 104(488), pages 1440-1453.
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