Average Duration Of Unemployment Research Articles

The Determinants of Labour Market Dynamics: A Canadian Cross-Provincial Application

A search & matching structure with endogenous job creation and job destruction is applied to derive key parameters of the Canadian labour market, at the provincial level. The Cobb-Douglas matching function parameters as well as the job-vacancy cost parameter are computed to match the unemployment rate, vacancy rate, and average unemployment duration in the 10 Canadian provinces. Results include a key role for the vacancy cost parameter in determining equilibrium unemployment and vacancy rates. Outside the general model, a simple matching function estimation fails to reject the constant returns to scale assumption.

Market Externalities of Large Unemployment Insurance Extension Programs

This paper offers quasi experimental evidence of the existence of spillover effects of UI extensions using a unique program that extended unemployment benefits drastically for a subset of workers in selected regions of Austria. We use non-eligible unemployed in treated regions, and a difference-in-difference identification strategy to control for preexisting differences across treated and untreated regions. We uncover the presence of important spillover effects: in treated regions, as the search effort of treated workers plummets, the job finding probability of untreated workers increases, and their average unemployment duration and probability of long term unemployment decrease. These effects are the largest when the program intensity reaches its highest level, then decrease and disappear as the program is scaled down and finally interrupted. We use this evidence to assess the relevance of different assumptions on technology and the wage setting process in equilibrium search and matching models and discuss the policy implications of our results for the EUC extensions in the US.

Market Externalities of Large Unemployment Insurance Extension Programs

This paper offers quasi experimental evidence of the existence of spillover effects of UI extensions using a unique program that extended unemployment benefits drastically for a subset of workers in selected regions of Austria. We use non-eligible unemployed in treated regions, and a difference-in-difference identification strategy to control for preexisting differences across treated and untreated regions. We uncover the presence of important spillover effects: in treated regions, as the search effort of treated workers plummets, the job finding probability of untreated workers increases, and their average unemployment duration and probability of long term unemployment decrease. These effects are the largest when the program intensity reaches its highest level, then decrease and disappear as the program is scaled down and finally interrupted. We use this evidence to assess the relevance of different assumptions on technology and the wage setting process in equilibrium search and matching models and discuss the policy implications of our results for the EUC extensions in the US.

Duration of unemployment and suicide in Australia over the period 1985–2006: an ecological investigation by sex and age during rising versus declining national unemployment rates

BackgroundThe relationship between unemployment and suicide may be sensitive to demographic factors, national unemployment rates, and length of time without employment. This study investigated these factors in relation to suicide...

Wage-Tenure Profiles and Mobility

The Dutch labour market is characterized by low job mobility and high average duration of unemployment for older jobseekers. This study investigates the role of wage-tenure profiles in explaining patterns of job mobility. Based on a large administrative database, the estimates show that wage-tenure profiles in the Netherlands are relatively steep. Furthermore, industries with high returns to tenure appear to have a high share of older workers, as well as high average job tenure. This implies that steep wage-tenure profiles are related to low levels of mobility.

Labor market dynamics over the business cycle: evidence from Markov switching models

This paper explores the evolution of the U.S. labor market across the business cycle and specifically the relationship between the unemployment rate and the average duration of unemployment. Labor market recoveries have long been thought of as lagging recoveries in broad economic activity. In particular, the unemployment rate peaks several months after official business cycle troughs and the average duration of unemployment lags further behind. Using estimates from Markov switching models of the unemployment rate, average duration of unemployment, jobless claims, and the exhaustion rate of regular unemployment insurance, this paper dates contractionary and expansionary phases of various aspects of the labor market and their relationship to the official phases of the business cycle. Evidence from these models suggests that inflows into unemployment recover almost contemporaneously with broad economic activity, while outflows recover almost a year after the end of official recessions. The differential timing in the recoveries of unemployment inflows and outflows, which is not a characteristic of most macro models of the labor market, accounts for the observed pattern between the unemployment rate and average duration of unemployment. Finally, when comparing the phases of the labor market to periods where Congress extends unemployment insurance benefits, it appears that policymakers target periods where the job finding rate is low, rather than periods where the stock of unemployed workers is high.

Choosing the Best Training Programme: Is there a Case for Statistical Treatment Rules?

When treatment effects of active labour market programmes (ALMPs) are heterogeneous in an observable way across the population, the allocation of the unemployed into different programmes becomes particularly important. In this article, we present a statistical model that can be used to allocate unemployed into different ALMPs. The model presented is a duration model that uses the timing-of-events framework to identify causal effects. We compare different assignment rules, and the results suggest that a significant reduction in the average duration of unemployment may result if a statistical treatment rule is introduced.

The role and significance of endogenous firing costs in a matching model with endogenous job destruction

Traditional models of the labor market assume fixed firing costs. This paper explores the implications of variable firing costs, building this new assumption into a matching model with endogenous job destruction. The available evidence on the outcomes of cases brought to labor courts suggests that firing costs are negatively related with labor market tightness. In such a case, we may no longer invoke “rigidities” on labor markets as the cause of their poor performance. Our model yields three interesting results. First, labor markets may have multiple equilibria that cannot be Pareto-ordered; each with its own configuration in terms of average duration of unemployment and filled jobs, as well as employment protection. Second, the variability of firing costs produces a positive externality affecting the stability properties of these equilibria. Finally, the two externalities affect the efficiency of the social optimum, modifying the Hosios [Hosios, A.J., 1990. On the efficiency of matching and related models of search and unemployment. Review of Economic Studies 57, 279–298] condition. We use these results to interpret the recent history of European unemployment.

The Threat Effect of Active Labour Market Programmes*

AbstractIn this paper, we estimate the threat effect of active labour market programmes (ALMPs) for a sample of unemployed men in Denmark. Threat effects of such programmes capture the impacts of a system of ALMPs prior to actual participation. Rational economic agents make search decisions based on the expected discounted value of unemployment, and the perceived risk of future participation in programmes may affect job‐search behaviour early in the unemployment spell. We find a strong and significant threat effect, which is shown to reduce average unemployment duration by two and a half weeks.

On Various Ways of Measuring Unemployment, with Applications to Switzerland

This paper begins with an examination of various ways of measuring unemployment and, borrowing ideas from the poverty measurement literature, proposes four new general unemployment indices. The first of these is parallel to the Sen poverty index; the second, to the Sen index's generalization by Shorrocks; the third, to the FGT poverty index; and the fourth, to the Watts poverty index. The authors then present an empirical illustration based on Swiss data compiled at the state, or canton, level, using the so-called Shapley decomposition to determine the contribution of three components - the traditional unemployment rate, the average unemployment duration, and the inequality in the unemployment durations - to the differences between the values of the four proposed indices, both within a given canton and within Switzerland as a whole. The paper concludes with a discussion of the assumptions made about the maximum unemployment duration for the purposes of the study, and their impact on the results obtained.

Benefit-Entitlement Effects and the Duration of Unemployment: An Ex-Ante Evaluation of Recent Labour Market Reforms in Germany

We analyse benefit-entitlement effects and the likely impact of the recent reform of the unemployment compensation system on the duration of unemployment in Germany on the basis of a flexible discrete-time hazard rate model estimated on pre-reform data from the German Socioeconomic Panel (SOEP). We find (i) relatively strong benefit-entitlement effects for the unemployed who are eligible to means-tested unemployment assistance after the exhaustion of unemployment benefit, but not for those without such entitlement; (ii) non-monotonic benefit-entitlement effects on hazard rates with pronounced spikes around the month of benefit-exhaustion, and (iii) relatively small marginal effects of the amount of unemployment compensation on the duration of unemployment. Our simulation results show that the recent labour market reform is unlikely to have a major impact on the average duration of unemployment in the population as a whole, but will significantly reduce the level of long-term unemployment among older workers.

RESIDUAL WAGE DISPARITY AND COORDINATION UNEMPLOYMENT*

How much of residual wage dispersion can be explained by an absence of coordination among firms? To answer, we construct a dynamic directed search model with identical workers where firms can create high‐ or low‐productivity jobs and are uncoordinated in their offers to workers, calibrated to the U.S. economy. Workers can exploit ex post opportunities once approached by firms, and can conduct on‐the‐job search. The stationary equilibrium wage distribution is hump‐shaped, skewed significantly to the right, and, with baseline parameters, generates residual dispersion statistics 75–90% of those found empirically. However, the model underestimates the average duration of unemployment.

U.S. Unemployment Duration: Has Long Become Longer or Short Become Shorter?

The U.S. labor market has been experiencing unprecedented high average unemployment duration. The shift in the unemployment duration distribution can be traced back to the early nineties. In this study, censored quantile regression methods are employed to analyze the changes in the US unemployment duration distribution. We explore the decomposition method proposed by Machado and Mata (2003) to disentangle the contribution of the changes generated by the covariate distribution and by the conditional distribution. The data used in this inquiry are taken from the nationally representative Displaced Worker Surveys of 1988 and 1998. We provide evidence that the change in the unemployment duration distribution is mainly produced by the opposing effects of a sharp uptick in job-to-job transition rates and an increased sensitivity of unemployment duration to unemployment rates. Compositional changes in the labor force played a limited role. We rationalize our findings by arguing that improved screening technology is likely to be the relevant underlying mechanism at work.

Unemployment Benefits, Unemployment Duration and Subsequent Job Quality

The high unemployment figures in many European countries are often attributed to overgenerous unemployment benefits. However, proponents of benefit cuts tend not to recognize that unemployment benefits also facilitate longer job searches and, as a result, ultimately improve job matches. In this article, we investigate the effects of unemployment benefits on subsequent job quality by differentiating between transitions from unemployment to correctly allocated jobs and to over-education. Data are drawn from the West German Life History Study (GLHS). Results from Kaplan-Meier estimators and hazard regression models show that non-recipients of unemployment benefits indeed have a shorter unemployment duration, but that they also have significantly higher rates of transition to over-education than recipients of unemployment benefits. On the other hand, the receipt of unemployment benefits does not influence the transition to qualified jobs, which seems to be influenced more by labour demand. It is therefore important to bear in mind that reforming the unemployment compensation system by reducing unemployment benefits will not only shorten the average unemployment duration, but also increase the incidence of over-education and consequently reduce the overall job match quality in the labour market.

Estimating the Threat Effect of Active Labour Market Programmes

We combine two techniques to consistently estimate the effect of active labour market programmes and, in particular, active labour market policy regimes. Our aim is to explicitly estimate the threat effect of active labour market programmes. Based on Danish data (1998-2002) from administrative registers we find a strong and significantly positive threat effect. The threat effect is shown to reduce average unemployment duration by approximately three weeks. The implications of this result are discussed.

Why Did the Average Duration of Unemployment Become So Much Longer?

This paper examines the causes of the observed increase in the average duration of unemployment over the past thirty years. First we analyze whether changes in the demographic composition of the U.S. labor force, particularly the age and gender composition, can explain this increase. We then consider the contribution of institutional changes, such as the change in the generosity and coverage of unemployment insurance. We find that changes in the composition of the labor force and institutional changes can only partially account for the longer duration of unemployment. We construct a job search model and calibrate it to U.S. data. The results indicate that more than 70 percent of the increase in the duration of unemployment over the past thirty years can be attributed to an increase in within-group wage inequality.

Estimating the Threat Effect of Active Labour Market Programmes

We combine two techniques to consistently estimate the effect of active labour market programmes and, in particular, active labour market policy regimes. Our aim is to explicitly estimate the threat effect of active labour market programmes. Based on Danish data (1998-2002) from administrative registers we find a strong and significantly positive threat effect. The threat effect is shown to reduce average unemployment duration by approximately three weeks. The implications of this result are discussed.

At Home and Abroad. By Francine D. Blau and Lawrence M. Kahn. New York: Russell Sage Foundation, 2002. Pp. xi, 314. $34.95.

In the 1970s the United States had far higher wages than the rest of the developed world; 1979–1981 median weakly earnings of men in full-time employment were $609 in 1998 prices, compared to an average of $419 across six other developed countries. However, the United States also had a higher unemployment rate; in 1973 it was 4.8 percent compared to an average of 2.1 percent in 11 other countries. Fast forward two decades. Median real wages in the United States, although still higher than in the other countries, had fallen 5.5 percent whereas in the other countries they had increased an average of 22.6 percent. However, whereas the unemployment rate in the United States fell slightly over the period, it skyrocketed in most of the other countries, averaging 8.2 percent in the European Union in 1999. By the late 1990s the United States also differed from the rest of the developed world in a number of other labor-market outcomes. The U.S. had: a lower average duration of unemployment and less prevalent long-term unemployment, higher labor-force participation rates among both men and women, longer average hours of work over the course of the year, and greater earnings inequality.

On the Time Sequence of Unemployment Benefits When Search is Costly

Should we cut the level of unemployment benefits, or reduce their potential duration? The answer depends on the way the unemployed search behaviour and unemployment insurance schemes interact. In this paper, we consider that unemployment insurance funds can be used to improve search. Resulting hazards are increasing over the unemployment spell prior to the exhaustion of benefits, and plummet immediately after it. Turning to policy implications, we assume the public decision–maker aims to minimize the average duration of unemployment under a resource constraint. First, we show the stationary relationship between average unemployment duration and unemployment benefit is hump–shaped. Second, raising benefits over a short duration can reduce average duration. Finally, we demonstrate that most of the time, a declining (yet always positive) benefit scheme is optimal.

Speed of Technical Progress and Length of the Average Interjob Period

The mean duration of unemployment has approximately doubled in the U.S. between the early 1950s and the mid-1990s, with most of the increase occurring since the early 1970s. We first construct a simple model linking the average duration of unemployment with the speed of technical change. Using aggregate time-series data for the U.S., we find strong evidence that both the rate of TFP growth and investment in office, computing, and accounting equipment (OCA) per employee have a significant positive effect on mean unemployment duration. Moreover, literally all of the two-thirds rise in mean unemployment duration between 1971 and 1994 (two similar points in the business cycle) can be attributed to increases in OCA investment.