Abstract
In this paper the effect of age, educational level, occupational group and regional labour market conditions on the probability of leaving the state of unemployment is estimated. We use a proportional hazard model based on grouped data of incomplete spells of unemployment for males in the Netherlands. The regional effect on the probability to leave the state of unemployment is estimated by including either regional dummy variables or the regional vacancy-unemployment ratio in the hazard model. Special attention is paid to the effects of unobserved heterogeneity, duration dependence and non-stationary inflow rates on the probability of leaving the state of unemployment. The conclusion is that the subgroups - identified with respect to age, education, occupation and region - show very different patterns of duration of unemployment. Model specification tests lead to the conclusion that there is unobserved heterogeneity but no duration dependence in our data set. The estimation results do not change if the effects of a non-constant probability of becoming unemployed are incorporated.
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