Exits from unemployment: Recall or new job

This paper studies transitions out of unemployment in Spain distinguishing between recall to the same employer and reemployment in a new job. We use a large sample of newly unemployed workers obtained from Social Security records for Spain. These data contain information about each individual's employer identity before and after the unemployment spell. A discrete-time duration model with competing risks of exits serves us to investigate the factors that influence the probabilities of leaving unemployment to return to the same employer or to find a new job with a different employer. We find that taking into account the route to exit unemployment helps us to understand the influence of individual and job characteristics on the hazard rate. Moreover, the recall hazard rate exhibits no duration dependence, whereas the new-job hazard rate presents positive duration dependence.     

Allocation of individuals to job levels under rationing

We augment an ordered response model for the job level at which individuals desire to work with allowance for individual reporting of a discrepancy between actual and desired job level, and we also investigate possible biases from restricting the observations to the employed, and omitting the unemployed. We find that the latter bias can be ignored and interpret this as evidence that the unemployed are not choosier than the employed. People claiming inadequate capability utilization are not markedly differently allocated than those claiming a proper match. Women's lower job levels cannot be explained from rationing by capability utilization.     

On-the-job search and cyclical unemployment: Crowding out vs. vacancy effects

Incorporating on-the-job search (OTJS) into a real business cycle model has been shown to increase the cyclical volatility of unemployment. Using a particularly simple model of OTJS, we show that the increased search of employed workers during expansions induces firms to open more vacancies, but also crowds out unemployed workers in the job search, resulting in an ambiguous overall effect on unemployment volatility. We show analytically and numerically that the difference between the employer׳s share of the match surplus with an employed versus an unemployed job seeker determines the degree to which OTJS increases unemployment volatility. We use this result to re-consider some related papers of OTJS and explain the amplification of volatility they obtain. Finally, we show that a plausible calibration of the OTJS model allows us to reproduce most significant features of the US labor data.     

Employed and Unemployed Job Seekers and the Business Cycle

The job search literature suggests that on‐the‐job search reduces the probability of un employed people finding jobs. However, there is little evidence that employed and unemployed job seekers are similar or apply for the same jobs. We compare employed and unemployed job seekers in their individual characteristics, preferences over working hours, job‐search strategies and employment histories, and identify how differences vary over the business cycle. We find systematic differences which persist over the business cycle. Our results are consistent with a segmented labour market in which employed and unemployed job seekers are unlikely to directly compete with each other for jobs.     

Durations in Panel Data Subject to Attrition: A Note on Estimation in the Case of a Stock Sample1

In the empirical analysis of unemployment durations or job durations, it is generally assumed that the stochastic processes underlying labour market behaviour and the behaviour concerning participation in a panel survey are independent. As a consequence, spells that are incomplete due to attrition can be treated as spells that are subjected to independent right censoring. However, if the assumption of independence is violated, i.e. if for example the probability of dropping out of the panel is related to the rate at which a job is found, then attrition may have to be modelled and estimated jointly with the unemployment duration distribution to avoid biased estimates of the rate at which individuals become employed. A way to model the joint dependence is by means of stochastically related unobserved determinants. We discuss some properties of these kinds of models and state conditions needed to estimate such models in the case of stock sampled duration data.     

HOW EFFECTIVE ARE STATE EMPLOYMENT AGENCIES? JOBCENTRE USE AND JOB MATCHING IN BRITAIN

Abstract State sponsored employment agencies are an important source of job matching in Britain. This study tracks Jobcentre use in Britain over the previous decade and the effectiveness of Jobcentre use in securing entry into employment for those who utilise its services. Amongst the unemployed, use of Jobcentres is highly counter-cyclical. This can be attributed principally to the changing composition of the stock over the economic cycle. In good times, there are relatively more short duration, voluntary quits in the stock, who tend to rely on Jobcentres least. Jobcentres are found to have a significant positive effect on the job entry rates of its clients. The greatest beneficial impact is amongst those, the low skilled and the long term unemployed with the lowest exit rates from unemployment.     

Fixed-term contracts as sorting mechanisms: Evidence from job durations in West Germany

We estimate the effect of initial episodes under fixed-term contracts (FTCs) on job duration in the further course of the employment spell, using data from the German Socio-Economic Panel (SOEP) from 1985 to 2002 and a statistical matching approach. Our results show that job exit rates are initially much higher if the employment spell began with an FTC. However, exit rates fall below those of comparable spells spent entirely in permanent employment after a few years time. This suggests that FTCs accelerate a sorting process and that they may at least to some part be understood as prolonged probationary periods. Strikingly, the probability of long-term employment of more than five years duration is not lower in spells that are initially concluded as FTCs. Hence, the sorting processes taking place in both forms of contracts lead to similar results.     

Boon or bane? Others' unemployment,well-being and job insecurity

The social norm of unemployment suggests that aggregate unemployment reduces the well-being of the employed, but has a far smaller effect on the unemployed. We use German panel data to reproduce this standard result, but then suggest that the appropriate distinction may not be between employment and unemployment, but rather between higher and lower levels of labour-market security, at least for men. Men with good job prospects, both employed and unemployed, are strongly negatively affected by regional unemployment. However, insecure employed men and poor-prospect unemployed men are less negatively, or even positively, affected. There is however no clear relationship for women. We analyse labour-market inequality and unemployment hysteresis in the light of our results.     

The Hiring Function Reconsidered: on Closing the Circle

This paper investigates the matching of job searchers with vacant jobs: a key component of the dynamics of worker reallocation in the labour market. The job searchers may be unemployed, employed or not in the labour force and we estimate matching or hiring functions including all three groups. We show that previous studies, which ignore both employed job seekers and unemployed job seekers who are considered to be out of the labour force, produce biased estimates of the coefficients of interest. By considering only unemployment outflows into jobs and ignoring interdependencies with other flows, these studies overlook an important aspect of job matching. Our estimates on Australian data support a more general approach and produce models that dominate those proposed previously. We find that concentrating on the aggregate matching function alone does not reveal the full extent of the interaction across job searchers. Indeed, we find that job searchers from the three groups do not receive a fair share of hires: there appears to be segmentation of hiring opportunities which may be explained by a form of ranking of applicants. Together these results demonstrate that the disaggregate worker flows and their interdependence are key features on the labour market and should be included in studies of the hiring process.     

A Bayesian Semiparametric Competing Risk Model with Unobserved Heterogeneity

This paper generalizes existing econometric models for censored competing risks by introducing a new flexible specification based on a piecewise linear baseline hazard, time‐varying regressors, and unobserved individual heterogeneity distributed as an infinite mixture of generalized inverse Gaussian (GIG) densities, nesting the gamma kernel as a special case. A common correlated latent time effect induces dependence among risks. Our model is based on underlying latent exit decisions in continuous time while only a time interval containing the exit time is observed, as is common in economic data. We do not make the simplifying assumption of discretizing exit decisions—our competing risk model setup allows for latent exit times of different risk types to be realized within the same time period. In this setting, we derive a tractable likelihood based on scaled GIG Laplace transforms and their higher‐order derivatives. We apply our approach to analyzing the determinants of unemployment duration with exits to jobs in the same industry or a different industry among unemployment insurance recipients on nationally representative individual‐level survey data from the US Department of Labor. Our approach allows us to conduct a counterfactual policy experiment by changing the replacement rate: we find that the impact of its change on the probability of exit from unemployment is inelastic. Copyright © 2014 John Wiley & Sons, Ltd.     

A journey home: What drives how long people are homeless?

This paper uses survival analysis to model exits from two alternative forms of homelessness: sleeping on the streets (‘literal homelessness’) and not having a home of one's own (‘housing insecurity’). We are unique in being able to account for time-invariant, unobserved heterogeneity. Like previous researchers, we find results consistent with negative duration dependence in models which ignore unobserved heterogeneity. However, controlling for unobserved heterogeneity, we find that duration dependence has an inverted U-shape with exit rates initially increasing (indicating positive duration dependence) and then falling. Exit rates out of both literal homelessness and housing insecurity fall with age. Women are more likely than men to exit housing insecurity for a home of their own, but are less likely to exit literal homelessness. Persons with dependent children have higher exit rates. Finally, education seems to protect people from longer periods of housing insecurity.     

Ranking of job applicants,on-the-job search,and persistent unemployment

We formulate an efficiency wage model with on-the-job search where wages depend on turnover and employers may use information on whether the searching worker is employed or unemployed as a hiring criterion. We show theoretically that such ranking of job applicants by employment status raises both the level and the persistence of unemployment and numerically that the effects may be substantial. More prevalent ranking in Europe compared to the US (because of more rigid wage structures, etc.) could potentially help to explain the high and persistent unemployment in Europe.     

Spatial mobility and competition for jobs: Some theory and evidence for Western Germany

This paper sheds new light on the role of regional labor market conditions for regional mobility. We study competition for vacant jobs along two dimensions – between employed and unemployed job searchers, and between resident and non-resident job searchers – within a simple matching framework. Evidence from estimating regional matching functions with data on job searchers disaggregated by previous employment status and regional provenance indicates that competition for jobs along both dimensions affects hiring. Tests of the theoretical predictions suggest that labor market conditions do determine regional mobility, but the countervailing effects of competition between employed and unemployed dilute mobility effects.     

Decomposing the Ins and Outs of Cyclical Unemployment

This paper analyses the contribution of the composition of the pool of employed and unemployed individuals to labour market dynamics in different phases of the business cycle. Using individual‐level data from the Current Population Survey (CPS), we decompose differences in employment status transition rates between upswings and downturns into explained and unexplained parts. We find that the duration of unemployment contributes to explaining unemployment outflows to employment and observe that its initially positive contribution turns negative in deep recessions. Composition effects play an important role for unemployment outflows to non‐participation but dampen the cyclicality of unemployment inflows from employment.     

Equilibrium search unemployment with explicit spatial frictions

Assuming that job search efficiency decreases with distance to jobs, workers' location in a city depends on spatial elements such as commuting costs and land prices and on labour elements such as wages and the matching technology. In the absence of moving costs, we show that there exists a unique equilibrium in which employed and unemployed workers are perfectly segregated but move at each employment transition. We investigate the interactions between the land and the labour market equilibrium and show under which condition they are interdependent. When relocation costs become positive, a new zone appears in which both the employed and the unemployed co-exist and are not mobile. We demonstrate that the size of this area goes continuously to zero when moving costs vanish. Finally, we endogeneize search effort, show that it negatively depends on distance to jobs and that long and short-term unemployed workers coexist and locate in different areas of the city.     

Are Short‐lived Jobs Stepping Stones to Long‐Lasting Jobs?*

This article assesses whether short‐lived jobs (lasting one quarter or less and involuntarily ending in unemployment) are stepping stones to long‐lasting jobs (enduring 1 year or more) for Belgian long‐term unemployed school‐leavers. We proceed in two steps. First, we estimate labour market trajectories in a multi‐spell duration model that incorporates lagged duration and lagged occurrence dependence. Second, in a simulation we find that (fe)male school‐leavers accepting a short‐lived job are, within 2 years, 13.4 (9.5) percentage points more likely to find a long‐lasting job than in the counterfactual in which they reject short‐lived jobs.     

Estimating the probability of a match using microeconomic data for the youth labour market

In this paper, we estimate the probability of a match for contacts between job seekers and vacancies. We relate the determinants of a match to the characteristics of the job seeker, the vacancy, and labour market conditions. Our main results are: ethnic minorities are discriminated against, but women are not; employers ‘cream’ the market and job seekers are ranked by their labour market state; high wage offers have a lower probability of a match; the probability of filling a job vacancy falls with vacancy duration, the higher stock of unemployed youths in a labour market, and the larger Careers Service; the probability of a match increases with job seeker duration.     

Urban search models under high-relocation costs. Theory and application to spatial mismatch

We develop a search-matching model in which mobility costs are so high that it is too costly for workers to relocate when a change in their employment status occurs. We show that, in equilibrium, wages increase with distance to jobs and commuting costs because firms need to compensate the transportation cost difference between the employed and unemployed workers at each location in the city. We also show that the equilibrium land rent is negatively affected by the unemployment benefit because an increase in the latter induce firms to create less jobs, which, in turn, reduces the competition in the land market. We then use this model to provide a mechanism for the observed spatial mismatch between where black workers live and where jobs are. We finally show that a transportation policy consisting in subsidizing the commuting costs of black workers can increase job creation and reduce unemployment if the level of the subsidy is set at a sufficiently high level.     

Evaluating the effectiveness of Washington state repeated job search services on the employment rate of prime-age female welfare recipients

This paper uses an unbalanced panel dataset to evaluate how repeated job search services (JSS) and personal characteristics affect the employment rate of the prime-age female welfare recipients in the State of Washington. We propose a transition probability model to take into account issues of sample attrition, sample refreshment and duration dependence. We also generalize Honoré and Kyriazidou’s [Honoré, B.E., Kyriazidou, E., 2000. Panel data discrete choice models with lagged dependent variables. Econometrica 68 (4), 839–874] conditional maximum likelihood estimator to allow for the presence of individual-specific effects. A limited information test is suggested to test for selection issues in non-experimental data. The specification tests indicate that the (conditional on the set of the confounding variables considered) assumptions of no selection due to unobservables and/or no unobserved individual-specific effects are not violated. Our findings indicate that the first job search service does have positive and significant impacts on the employment rate. However, providing repeated JSS to the same client has no significant impact. Further, we find that there are significant experience-enhancing effects. These findings suggest that providing one job search services training to individuals may have a lasting impact on raising their employment rates.     

Evaluating job-search programs for old and young individuals: Heterogeneous impact on unemployment duration

This paper exploits an area-based pilot experiment to identify average treatment effects on unemployment duration of treated individuals of two active labor market programs implemented in Portugal. We focus on the short-term heterogeneous impact on two subpopulations of unemployed individuals: young (targeted by the Inserjovem program) and old (targeted by the Reage program). We show that the latter program has a small and positive impact (reduction) on unemployment duration of workers finding a job upon participation, whereas the impact of Inserjovem is generally negative (extended durations). These results are robust to a wide variety of constructions of quasi-experimental settings and estimators. The identification of heterogeneous effects showed that the program results were less satisfactory for young workers, for those over 40 and for the less educated. Women also benefited less from the programs. The results seem to improve slightly for young workers in the 2nd semester of implementation, but they deteriorate in the medium term. The lack of wage subsidies in the Portuguese programs may explain the minor impacts obtained, when compared to similar programs.