Unemployment durations and local labour market conditions

ABSTRACT

Unemployment durations vary across local authority districts in the UK. We explore the extent to which this variation is explained by differences in local labour demand as opposed to composition, business cycle and regional effects. We use seventeen waves of the British Household Panel Survey to identify the determinants of the duration of unemployment spells. Once we adjust for individual-level, business cycle and regional controls, we do not find evidence that living in a local authority district with relatively high unemployment is associated with longer spells of unemployment. This indicates that differences in labour demand operate at larger geographic scales, such as between large regions. Our findings have implications for the design of policies to help high unemployment districts.     

Black–white wage differentials: duration and probability unemployment effects in a multiple of sample selection bias model

The extent to which probability and duration of unemployment affect the black–white wage differentials is examined in this paper. The paper simultaneously incorporates in the wage equation the multiple sample selection bias that occurs as a result of individuals’ propensity to be in the labor force, and the firm’s hiring decisions. The results reveal a substantial contribution of the duration of unemployment variable to the black–white wage differential, but a small portion of the differential is explained by the probability of unemployment. The results also indicate a sizeable difference between the contribution of the duration of unemployment variable to the male’s wage differentials (26%) and to the female’s (35%). The study finds that an individual’s labor force decision as well as a firm’s hiring decision are important in the wage determination process and that failure to account for the sample selectivity bias due to these two decisions will result in either underestimating or overestimating the wage differentials between black and white workers. At the macro level, the results seem to suggest that promotion of racial wage equality should be associated with policies that will minimize blacks’ incidence of unemployment and duration of unemployment spells.     

Re-employment probabilities of unemployment benefit recipients

This article studies transitions out of unemployment for benefit recipients in Spain. We analyse the duration of unemployment, distinguishing between spells that end in recall (workers returning to the previous employer) and spells that end in exit to a new job. This distinction allows us to find that the recall hazard rate increases around the time of exhaustion of benefits. However, this happens only for workers receiving Unemployment Insurance (UI). Because we are unable to replicate this result for workers receiving Unemployment Assistance (UA), we believe the finding lends support to the hypothesis that in Spain firms and workers make a strategic use of UI.     

Couple Formation in France: The Changing Importance of Labor Market Early Career Path

This article shows that couple formation and labor market early career path (as measured by unemployment, insecure employment, and characteristics of the first job) are intrinsically linked. We use data from the 1997 ‘Jeunes et Carrières’ survey to consider the experience of two different generations. We show that, with the arrival of mass unemployment, labor market early career path has become an important factor in couple formation, while the effect of education has diminished for young men in recent cohorts. The rise of the two-earner couple has gone hand-in-hand with greater symmetry between men and women in terms of couple formation: specifically, unemployment now reduces couple formation for both sexes. Some more traditional aspects persist however: (i) Women who are inactive on the labor market form couples earlier than do other women; (ii) Low wages in the first job encourage (discourage) couple formation for women (men); (iii) Higher education favors men's couple formation, but not that of working women; and (iv) Temporary work does not discourage couple formation by women. This revised version was published online in July 2006 with corrections to the Cover Date.     

Age effects in Okun’s law with different indicators of unemployment

We reassess the results from the literature on the relationship between the youth unemployment rate and GDP growth (Okun’s law), based on the concern that the unemployment rate is not an ideal indicator for teenagers and young adults. Using the unemployment ratio instead, we find that youth unemployment (15–24 years old) is not significantly more responsive to economic growth than prime-age (25–64) unemployment. However, compared to prime-age unemployment, teenagers’ unemployment (15–19) is relatively unresponsive, whereas young adult’s (20–24) unemployment is more strongly correlated with economic growth. These results are quite different than those obtained with the unemployment rate as the dependent variable.     

UNANTICIPATED EFFECTS OF CALIFORNIA'S PAID FAMILY LEAVE PROGRAM

We examine the effect of California paid family leave (CPFL) on young women's labor force participation and unemployment, relative to men and older women. CPFL enables workers to take at most 6 weeks of paid leave over a 12‐month period in order to bond with new born or adopted children, or to care for sick family members or ailing parents. The policy benefits women, especially young women, as they are more prone to take such a leave. However, the effect of the policy on overall labor market outcomes is less clear. We apply difference‐in‐difference techniques to identify the effects of the CPFL legislation on young women's labor force participation and unemployment. We find that the labor force participation rate, the unemployment rate, and the duration of unemployment among young women rose in California compared to men (particularly young men) and older women in California, and to other young women, men, and older women in states that did not adopt PFL. The latter two findings regarding higher young women's unemployment and unemployment duration are unanticipated effects of the CPFL program. We utilize robustness checks as well as unique placebo tests to validate these results.(JEL H43, J13, J18, J48)     

Exploring different measures of wage flexibility in a developing economy context: the case for Turkey

In this paper we use Turkish household labor force data to address a number of conceptual issues pertaining to the wage curve, an empirically derived negative relationship between the real wage level and the local unemployment rate. First, we show that in developing economies where labor markets are prone to high degree of segmentation by skill level, local unemployment rates disaggregated by education provide more accurate measures of the degree of group-specific wage competition and hence yield more robust results of the wage curve analyses. Second, we estimate the wage curve using various definitions of the unemployment rate, including discouraged and marginally attached workers, and the long-term unemployment rate to explore the most relevant measure of local labor market tension in the wage setting process. We find that broader definitions of unemployment serve as a more effective reference point in measuring wage flexibility for women, whose attachment to the labor market is substantially weak in the Turkish context; while for men the official and long-term unemployment rates perform well. Finally, using quantile regression we show that wage responsiveness to unemployment cannot be assumed to be constant along the wage distribution. In the Turkish case, we find a higher unemployment elasticity of wages around the median segment of wage distribution. This effect is more pronounced for women.     

GDP dynamics and unemployment changes in developed and developing countries

We design a new specification of Okun’s model that takes the following features into account: estimation of the relation in first differences, the possible lagged effect of GDP dynamics on unemployment changes, the persistence of unemployment rate dynamics, the possible different values of Okun coefficients under recession (with respect to periods of increases in GDP), the existence of cross-country institutional and structural differences (i.e. country-specific Okun coefficients), the additional effect on unemployment caused by large adverse shocks such as financial crises.

A distinctive feature of this article is its consideration of a large set of countries for which we find differentiated Okun coefficients. Moreover, we focus in particular on the distinction between developed and developing countries, and on the additional impact of financial crises. From an econometric point of view, the model developed belongs in the family of linear mixed-effects models. The estimation method uses an expectation-maximization (EM) algorithm. Our results confirm the general validity of ‘Okun’s law’; they show the Okun coefficient differences between high- and low-income countries; and they evidence an additional impact of some types of financial crisis on the unemployment dynamics of developed economies.     

Layoffs,recalls and unemployment duration: evidence from Sweden

The question addressed in this paper is whether the possibility of exit from unemployment to the previous employer affects the duration of unemployment spells in Sweden. The empirical analysis is performed using an employee–employer dataset that includes a number of enterprise characteristics and provides information on individual tenure. The econometric approach employs estimation of a competing risk duration model to distinguish between exits to the previous employer and exits to a new job. The findings suggest that greater tenure raises the risk of transition to the previous employer, while high education levels increase the risk of obtaining a new job. Moreover, the impact of benefit exhaustion is observed only for transitions to new employment.     

Does the unemployment invariance hypothesis hold for Romania?

This article questions whether the unemployment invariance hypothesis of Layard et al. (2005), which states that movements in labour force do not significantly affect unemployment rates, holds true for Romania. Using quarterly labour force data for the 1996–2012 period, we explore the time-series properties of the two variables. We find that unemployment rates and participation rates have unit roots, and that they are not cointegrated, meaning that no significant long-term relationship exists between them. The analysis carried out on the first differences of unemployment rates and participation rates shows discouraged and added worker effects for Romania’s female labour force. This conclusion diverges from findings that point out to a stable, long-term relationship between unemployment and participation in several developed countries (Japan, Sweden, USA) and shows that Romanian labour market is highly adaptive, where changes in labour force participation do not lead to increases in unemployment. This finding can help model the influence of adverse developments such as ageing and emigration, and show their true impact beyond demographic doom scenarios. It also points out the role played by labour demand in shaping the evolution of the Romanian labour market.     

The Lure of Ill-Fitting Unemployment Statistics: How South Africa’s Discouraged Work Seekers Disappeared From the Unemployment Rate

ABSTRACT

Unemployment refuses unambiguous definition. Its statistical representation is always open to contestation, especially where labour markets differ from the Western-industrial norm. Why do countries adopt international standards even if they may fit local conditions poorly? South Africa is an exemplary case to answer this question. When Apartheid ended in the early 1990s, South African statisticians embraced the new emancipatory spirit. Their broad unemployment indicator defied international conventions but did justice to the marginalised Black population, and to Black women in particular. Since then, however, South Africa has fallen in line with the much narrower definition of the International Labour Organization (ILO), in spite of widespread criticism. Why? We find that ILO standards were not forced upon South Africa. Instead, South African statisticians themselves embraced international standards to repel charges of arbitrary or politically motivated numbers. Counterintuitively, international standards become alluring precisely when doubts about statistics’ fit with local conditions are the greatest.     

Gender differences in the quality of the school-to-work transition in Spain

This article analyses to what extent gender affects the quality of the school-to-work transition in Spain, paying special attention to workers’ educational attainment. We estimate a four-equation system that explains the main obstacles young people face in their insertion process: part-time work, overeducation, fixed-term contracts and long unemployment spells; the model also considers the impact of the latter variable on the other three. Moreover, a synthetic indicator of transition quality based on the estimation of this model is developed. We conclude that men experience a better insertion process than women at every level of education (except for higher vocational training), although the gender gap is greater for long-cycle university programmes. Furthermore, when field of study is considered, men from most specializations enjoy a smoother transition than their female counterparts; nevertheless, women have the advantage in some female-dominated fields. A further analysis of gender differences reveals that they are due to the fact of being male or female to a great extent. The results also highlight that school-leavers from work-oriented programmes and those specialized in fields that provide them with more specific skills are more likely to succeed in the transition.     

Recurrent unemployment,welfare benefits and heterogeneity

The objective of this paper is to investigate the causes of the recurrences of individuals in unemployment during benefit periods. So as to attain this objective, we use administrative data from the Spanish Employment Agency to estimate a duration model with multiple spells that allows for unemployment state dependence through lagged unemployment duration in order to distinguish the heterogeneity and scarring effects. We find that an increase in the duration of previous unemployment benefit periods lengthens the expected duration of future unemployment benefit periods. True state dependence and heterogeneity, intensity of job search and local labour market conditions are among the elements that explain this unemployment state dependence.     

Explaining ethnic unemployment and activity rates: evidence from the QLFS in the 1990s and 2000s

This article uses data from the Quarterly Labour Force Survey for 1992–95 and 2000–03 to examine changes in ethnic unemployment and economic activity. The intention was to compare the relatively high unemployment era of the 1990s with the lower unemployment era of the 2000s. Although the ethnic minority unemployment situation has improved, only half of the difference between white and non‐white unemployment can be attributed to differences in observed characteristics. This suggests that a large unexplained discriminatory element still exists for most ethnic minorities. This has become larger for Pakistani/Bangladeshi men, implying a widening of the unexplained ethnic differential.     

Trade between Euro zone and Arab countries: a panel study

We present empirical evidence regarding unemployment dynamics for women and men in eight OECD countries. Unit-root tests are used to examine the unemployment dynamics of women and men. Failure to reject the unit-root hypothesis is consistent with unemployment hysteresis. Rejection of the unit-root hypothesis indicates that unemployment dynamics are best explained by the natural rate of unemployment or the structuralist view. We find evidence of gender differences in unemployment dynamics in Canada, Germany and the US, but not in other countries. While there are some differences in the extent of persistence across gender and across countries, the degree of persistence for both female and male unemployment rates is fairly low in all countries. Our results, therefore, contrast with substantial empirical evidence of high levels of unemployment persistence in European countries.     

Employment and asset prices

A medium-term relationship exists between share prices, normalized by labour productivity, and the rate of unemployment in the Organization for Economic Co-operation and Development (OECD) countries. This helps explain decadal changes in mean unemployment, such as the shift to higher mean unemployment in the Continental European countries in the 1970s and 1980s that coincided with a fall in the level of share prices, as well as differences in mean unemployment between countries.     

Unemployment and the shadow economy

Current research links the shadow economy (SE) and the unemployment rate either indirectly or by means of a preliminary estimate. This article establishes and empirically implements a methodology for estimating the size of the SE as a direct function of the tax and unemployment rates. This link is found to be extremely relevant in countries with high unemployment rates (such as Greece and Spain) and less relevant in countries with moderate unemployment rates (such as Germany and Italy). Unemployment’s contribution to the SE is shown to be significant, especially in the years following the economic downturn of 2008. The calculation of the variance and distribution of these estimates is another significant contribution. The common criticism that SE estimates are unreliable is addressed by calculating the variance and the distribution of the estimates, and the large size of the SE in Greece and Spain is once again confirmed.     

1990年以来我国城镇真实失业率有多高?

我国政府一直没有公布城镇的真实失业率,而学者的估计往往在统计口径上不一致,方法上也还存在一定的缺陷。利用第五次人口普查资料,作了定量比较。以现有资料推算我国真实的失业率,失业人数调整法比失业率调整法更为科学,并通过线性回归法得到调节系数。我国目前城镇的真实失业率为8.8%,失业人员总量低幅增长,失业率已持续下降。     

The Henderson Question? The Melbourne Institute and 50 Years of Welfare Policy

I discuss selected research contributions of the Melbourne Institute of Applied Economic and Social Research to 50 years of welfare policy for those of workforce age and focus particularly on the policy focus of R. F. Henderson, the inaugural director. Following the spirit of his 1960s poverty research, in the mid‐1970s, government doubled unemployment allowances in real terms and increased pensions by approximately 40 per cent. Both income support payments were to be indexed by average wage increases. At the time, unemployment was typically around 1 per cent and the pension take‐up for those of workforce age was also limited. Today, income support take‐up rates have probably increased fivefold. In response, government has adopted a ‘make work pay’ policy over the last two decades and indexed allowances for Consumer Price Index increases and allowances have fallen by 25–35 per cent, relative to community living standards. Pensions continue to be indexed by average wage changes. I address a range of questions arising from this experience, including: Why has government abandoned the Henderson recommendations?; Is there any evidence that a ‘make work pay’ policy is working?

     

Who moves? A logit model analysis of inter-provincial migration in Canada

This paper addresses the topic of inter-provincial migration in terms of the basic question: ‘Who moves?’. Panel logit models of the probability that an individual changes his or her province of residence from one year to the next over the 1982–1995 period are estimated using tax-based longitudinal data. It is found that moving is (i) inversely related to the home province's population size, presumably reflecting local economic conditions and labour market scale effects, while language also plays an important role; (ii) more common among residents of smaller cities, towns, and especially rural areas than those in larger cities; (iii) negatively related to age, marriage, and the presence of children for both men and women; (iv) positively related to the provincial unemployment rate, the individuals’ receipt of unemployment insurance (except Entry Men), having no market income (except for Entry Men and Entry Women), and the receipt of social assistance (especially for men); (v) (slightly) positively related to earnings levels (beyond the zero earnings point) for prime aged men, but not for others; and (vi) more or less stable over time, with men's rates declining slightly and women's holding steadier or rising slightly, indicating a divergence in trends along gender lines.