Job separation in a non‐stationary search model: a structural estimation to evaluate alternative unemployment insurance systems

This paper considers a job search model in which the environment is not constant throughout the unemployment spell and where jobs do not last for ever. In this situation, reservation wages can be lower than they would be in a model without consideration of such separations, but they can initially be higher precisely because of the non‐constant environment. The model is estimated structurally by using Spanish data for the period 1985–1996. The main finding is that, after controlling for unobserved heterogeneity, the unemployment hazard rate is almost flat during the first six months. However, after this duration, the highly decreasing job offer arrival rate comes to be the only significant factor, given that acceptance probabilities become equal to one. The estimated parameters are used to evaluate different unemployment insurance designs. We conclude that a non‐monotonic pattern in unemployment benefits, joint with a tax paid by workers and based on unemployment duration, makes this duration 13.2% lower than it currently is in Spain. Copyright © 2006 John Wiley & Sons, Ltd.     

HOW EFFECTIVE ARE UNEMPLOYMENT BENEFIT SANCTIONS? LOOKING BEYOND UNEMPLOYMENT EXIT

This paper provides a comprehensive evaluation of the effects of benefit sanctions on post‐unemployment outcomes such as post‐unemployment employment stability and earnings. We use rich register data which allow us to distinguish between a warning that a benefit reduction may take place in the near future and the actual withdrawal of unemployment benefits. Adopting a multivariate mixed proportional hazard approach to address selectivity, we find that warnings do not affect subsequent employment stability but do reduce post‐unemployment earnings. Actual benefit reductions lower the quality of post‐unemployment jobs both in terms of job duration as well as in terms of earnings. Copyright © 2012 John Wiley & Sons, Ltd.     

Transitions From School to Work and the Early Labour Market Experience

We consider transitions from school to work and the early market experience. The duration of post-school unemployment, wages, and job duration are estimated simultaneously. We find that individuals with higher levels ofschooling get jobs more quickly and have longer employment durations. Apprentices have shorter unemployment periods and stay longer in their jobs than others at the same educational level. Females have shorter unemployment periods and lower wages, and also stay in the first job longer. The unemployment duration and the accepted wage affect job duration positively, but the estimated covariance terms suggest unobserved factors working in the opposite direction.     

Treatment effect of job-training programmes on unemployment duration in Slovakia

There is a large literature evaluating job-training programmes. In this paper, we evaluate three such job-training programmes that are used in Slovakia. Individuals participating in a job-training programme during their unemployment spell are usually not a random subsample of the population. To determine the treatment effect of a job-training programme on unemployment duration, one has to correct for this selection effect. Therefore, we use a multivariate mixed proportional hazard-type model to describe the hazard of getting a job simultaneously with the hazard of entering a programme. We allow for a heterogeneous treatment effect and for the treatment effect to vary over time. Furthermore, we add the monthly unemployment rate as a time-varying explanatory variable. The estimation results show that two of the three programmes shorten the unemployment duration quite substantially.     

The search for success: do the unemployed find stable employment?

We use discrete time proportional hazards regressions to model the impact of previous unemployment incidence and duration on job tenure. We find that jobs that follow an unemployment spell have shorter mean duration than other jobs. Only one half of jobs that follow unemployment last for 12 months. Multivariate results suggest that an unemployment spell has a severe penalty on subsequent job tenure, and that it is unemployment incidence rather than duration which has the major impact.     

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.     

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.     

The cyclical pattern of regional unemployment flows in Poland

Using male unemployment benefit data across Polish regions during 1994–1996, we find that unemployment flows are pro-cyclical and increase with job reallocation, controlling for other factors. At the national level we observe that job reallocation and output are associated with stagnant unemployment flows, low inflows and long duration. This has heretofore been attributed to workers by-passing the unemployment benefit system as they move job to job. We show this to be a fallacy of aggregation. The cyclical behaviour of regional unemployment flows and their response to job reallocation suggests that workers use unemployment benefit system to facilitate transition.     

Unemployment insurance and job turnover in Spain

The aim of this paper is to shed some light on the potential relationships between the unemployment insurance system and labour market turnover. This study assumes the incentives embedded in the unemployment insurance system have a heterogeneous impact, depending on the type of labour market transition (quits versus layoffs and recalls versus new job entrances) and on a worker's attachment to the labour market (gender and type of contract). The layoff hazard rate increases as workers qualify for unemployment benefits, whilst the quit hazard rate remains stable. Similarly, employment inflow increases sharply after the exhaustion of unemployment benefits. The timing and importance of the exit differ between recalls and new job entry and depend on a worker's attachment to the labour market. The results show that unemployment benefits appear to favour job turnover and both firms' and workers' decisions seem to matter.     

Using a Structural‐Form Model to Analyze the Impact of Home Ownership on Unemployment Duration

It is often found that the impact of home ownership on the hazard rate for leaving unemployment is positive, indicating that home ownership helps workers to leave unemployment for a paid job. However, little emphasis has been given to how such a relationship can be explained. This paper estimates a structural‐form model that allows for self‐selection into home ownership and the risk of home owners losing their property during a spell of unemployment. We find a substantial amount of self‐selection using indirect inference based on a mixed proportional hazards‐rate model and find virtually no impact of home ownership on individual labor market performance. Copyright © 2016 John Wiley & Sons, Ltd.     

Job search incentives and job match quality

We examine the impacts of time-limited unemployment insurance (UI) and active labor market programs (ALMP) on the duration and outcome of job search in Norway. We use a comprehensive simultaneous equations model accounting for i) the duration of unemployment spells; ii) their outcomes, iii) subsequent employment stability; and iv) the earnings level associated with the first job. We find that time invested in job search pays off in form of higher earnings once a job match is formed. ALMP raises the probability of eventually finding a job as well as expected earnings, but at the cost of lengthening job search.     

Market structure and spells of employment and unemployment: Evidence from the construction sector in Egypt

This paper investigates the links between market structure and spells of employment and unemployment in the construction sector in Egypt using an augmented job search framework. Two key features of the model are the reservation frontier which allows for a trade-off between wages and expected duration of employment, and the dependency of unemployment durations on expected employment durations and expected wages. These, as well as conjectures concerning the influence of demand-side forces obtained from the expressions for the transition rates out of employment and unemployment, are examined using Weibull, log-logistic and generalized gamma parameterizations of the hazard rate. The parametric assumptions are exploited to resolve problems associated with selectivity and use of generated regressors.     

Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity

The relationship between Unemployment Insurance (UI) benefit duration, unemployment duration and subsequent job duration is investigated using a multi‐state duration model with state specific unobserved heterogeneity. I examine two potential explanations for the negative correlation between unemployment and job spell durations; UI benefits increase job matching quality (the ‘Matching’ effect) versus unobserved heterogeneity (‘Adverse Selection’). The Matching effect is found to be weak. Although new jobs accepted within 5 weeks of benefit termination seem to have a higher dissolution rate, the negative correlation between unemployment and job duration is mostly explained by unobserved heterogeneity. Various simulations indicate that increasing the maximum benefit duration by one week will raise expected unemployment duration by 1.0 to 1.5 days but will raise expected job duration by 0.5 to 0.8 day only. Copyright © 2001 John Wiley & Sons, Ltd.     

Promoting employment of disabled women in Spain; Evaluating a policy

Even though the Disability System in Spain is designed to allow partially disabled individuals to combine the receipt of the benefits with a job, their employment rates have remained very low since 1996. The aim of this paper is to evaluate the results of an employment promotion policy introduced in Spain in 2004 which increased the deductions to the Social Security contributions paid by employers that hired disabled women. We apply difference-in-difference models and estimate a recursive bivariate probit model to evaluate the existence of shifts in employment trends in the women relative to the men sample conditioning on the existence of preexisting trends. We find that the impact of the policy is significant and we estimate an average elasticity of employment of 0.14 for partially and of 0.08 for totally disabled women relative to the deductions in the employer Social Security contributions. Finally, when we extrapolate the results beyond our sample, we estimate that 7100 disabled women were able to find a job in Spain due to the policy with an associated cost of 10,997.900 euro for the government.     

Distribution and determinants of lifetime unemployment

The empirical literature on unemployment almost exclusively focuses on the duration of distinct unemployment spells. In contrast, we use a unique administrative micro data set for the time span 1975-2004 to investigate individual lifetime unemployment — defined as the cumulative length of all unemployment spells over a 25-year period. This new perspective enables us to answer questions regarding the long-term distribution and determinants of unemployment for birth cohorts 1950-1954. We show that lifetime unemployment is highly concentrated on a small part of the population. With censored quantile regressions we investigate the long-lasting influence of bad luck early in the professional career: Controlling for individual and firm characteristics we find that choosing at a young age what turns out to be an unfavorable occupation significantly increases the predicted amount of lifetime unemployment.     

Immigrant wage profiles within and between establishments

Life cycle wages of immigrants from developing countries fall short of catching up with wages of natives. Using linked employer–employee data, we show that 40% of the native–immigrant wage gap is explained by differential sorting across establishments. We find that returns to experience and seniority are similar for immigrant and native workers, but that differences in job mobility and intermittent spells of unemployment are major sources of disparity in lifetime wage growth. The inferior wage growth of immigrants primarily results from failure to advance to higher paying establishments over time. These empirical patterns are consistent with signaling disadvantages of immigrant job seekers, but not with the explanation that low wage growth follows from inferior information about employers and job opportunities.     

Do Labour Market Programmes Speed up the Return to Work?*

We evaluate the impact of labour market programmes on unemployment durations in Norway, by means of a distribution‐free mixed proportional competing risks hazard rate model. We find that programme participation, once completed, improves employment prospects, but that there is often an opportunity cost in the form of a lock‐in effect during participation. The average net effect of programme participation on the length of the job search period is found to be around zero. For participants with poor employment prospects, the favourable post‐programme effects outweigh the negative lock‐in effects.     

Social networks and labor market transitions

We study the influence of social networks on labor market transitions. We develop the first model where social ties and job status coevolve through time. Our key assumption is that the probability of formation of a new tie is greater between two employed individuals than between an employed and an unemployed individual. We show that this assumption generally generates negative duration dependence of exit rates from unemployment. Our model has a number of novel testable implications. For instance, we show that a higher connectivity among unemployed individuals reduces duration dependence and that exit rates depend positively on the duration of the last job held by the unemployed worker.     

Conducting inference in semiparametric duration models under inequality restrictions on the shape of the hazard implied by job search theory

Using a four-month panel of revised Current Population Survey data from September–December 1993, we extend the class of semiparametric hazard models of the type first studied by Prentice and Gloeckler ( 1978 ), and brought to the attention of economists by Meyer ( 1988 , 1990 ), to incorporate inequality restrictions on the shape of the hazard. This extension enables us to test hypotheses regarding the shape of the hazard implied by search theory using duration data alone. These tests provide another link between the empirical and theoretical literatures on unemployment duration and job search. The GHK probability simulator makes it straightforward to generate approximate hypothesis test results, as simulation estimates of the probability under the null hypothesis are generated using the asymptotic normal approximation to the distribution of the hazard parameters obtained from maximum likelihood estimation. Importance sampling is used to conduct inference under the null and obtain exact finite sample estimates of the probability the null is satisfied. A new algorithm for maintaining stability of the importance weights is also developed. Copyright © 1999 John Wiley & Sons, Ltd.     

Optimal unemployment policy in a matching equilibrium

This paper considers optimal unemployment policy in a matching equilibrium with risk averse workers and unobserved job search effort. The Planner chooses unemployment benefits, taxes and job creation subsidies to maximise a Utilitarian welfare function. Optimal policy involves a trade-off between higher employment taxes (which finance more generous unemployment benefits) and greater market tightness (which reduces the average unemployment spell). Optimal UI implies the initial UI payment equals the wage, thus ensuring consumption is smooth across the job destruction shock, and UI payments then fall with duration.