Distribution of Unemployment Spells and Survival Analysis: The Case of Bosnia and Herzegovina

Narela Bajram

doi:10.21533/scjournal.v2i2.25

Abstract

It is not enough to study the labour market only by analysing the static variables like rates of employment and unemployment. For the decision making on the labour market it is essential to see the movement of people into and out of jobs, the extent to which they can or cannot quickly find alternative employment and to which extent different groups of the labour force are more affected than others. Using the frailty models, as a specific area in survival analysis, we show that the durations of unemployment are sensitive to the educational level and gender. First, females are experiencing significantly longer durations of finding job than man. Second, better-educated individuals appear to find job more quickly than the less-educated. Finally, there is evidence of duration dependence in unemployment in Bosnia and Herzegovina. The re-employment hazard exhibits positive duration dependence in the first 59 months, and then declines approximately 60 months.

Highlights

It is not enough to study the labour market only by analysing the static variables like rates of employment and unemployment
This paper focuses on frailty modes, a specific area in survival analysis
The initial period of positive duration dependence may result from greater search activity soon after becoming unemployed, or from individuals being recalled to their previous job after a shorter spell

Summary

INTRODUCTION

It is not enough to study the labour market only by analysing the static variables like rates of employment and unemployment. Unemployment duration refers to the amount of time that an individual remains unemployed It is an important variable which can explain the changes in labour markets and it is widely used in the job destruction and job creation models when analysing the flows between employment, unemployment and out the labour force. In this paper we try to determine other factors (gender and education level) which may produce variation of unemployment duration, using the frailty models as a specific area in survival analysis. Section 2.discusses the frailty model as special area in survival analysis. Survival analysis is generally defined as a set of methods for analyzing data where the outcome variable is the time until the occurrence of an event of interest. The term frailty was first suggested by Vaupel et al (1979) in the context of mortality studies, and Lancaster (1979) incorporated the frailty concept into a study of duration of unemployment. Hougaard (1984) discusses the ramifications of the assumed distribution of the frailty, whether gamma or inverse Gaussian

APPLICATION

Effect of Gender and Education Level on Unemployment Duration

OBTAINING UNCONDITIONAL PREDICTION

CONCLUSIONS