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In contemporary labor economics increasing attention is paid to the fact that unemployment is not only a stock but also a flow phenomenon. The present micro-econometric study analyses the impact of important socio-economic characteristics on unemployment duration in West Germany. Based on a search theoretic framework unemployment duration is considered as a stochastic process whose evolution is influenced by economic and demographic variables like unemployment benefits, expected wage offers, training and age. This is modeled by application of the concept of the hazard rate which denotes the conditional exit rate from unemployment over time given elapsed unemployment duration. Contrasting more traditional models a semi-parametric approach is chosen which reduces the danger of mis-specification of the stochastic duration process.
This procedure also is particularly suitable for the analysis of grouped observations on umemployment duration typically generated by longitudinal data sets as the German "Socio-Economic Panel" which is utilized for this study. Besides deriving a set of empirical results on unemployment duration in West Germany methodological issues of duration analysis are considered with particular attention paid to the impact of the sample design. Also, important outcomes from search theory and findings from other hazard rate analysis are surveyed.
List of contents
I. Introduction.- II. Models of Individual Unemployment Duration.- II.1 Models of Labor Leisure Choice.- II.2 Job Search Theory.- III. Hazard Rate Models.- III.1 Single Risk Models.- III.2 Competing Risks Models.- III.3 Parameterization of the Regression Model.- III.4 Unobserved Heterogeneity.- III.5 Survey of Empirical Findings from Hazard Rate Models.- IV. Alternative Approaches for the Analysis of Duration Data.- IV. 1 Time Series Regression Analysis with Aggregate Data.- IV.2 Structural Job Search Models.- IV.3 Calculation of Individual Reservation Wage Elasticities.- V. Sample Designs and Semi Parametric Specification.- V.1 Sample Designs for Unemployment Duration.- V.2 Semi Parametric Specification of Hazard Rate Models.- VI. The Variables.- VI.1 Unemployment Duration.- VI.2 Economic and Demographic Characteristics.- VI.3 Unemployment Benefits and Expected Earnings.- VI.3.1 The German Unemployment Benefits System.- VI.3.2 Conceptual Issues Regarding Benefits and Earnings.- VI.3.3 Sample Information on Unemployment Benefits.- VI.3.4 Estimation of Wage Offer Distributions.- VII. Results of the Hazard Rate Analysis.- VIII. Summary of Main Results and Outlook on Aggregate Unemployment.- Appendix: Sample Means and Standard Errors.- References.
Summary
In contemporary labor economics increasing attention is paid
to the fact that unemployment is not only a stock but also a
flow phenomenon. The present micro-econometric study
analyses the impact of important socio-economic
characteristics on unemployment duration in West Germany.
Based on a search theoretic framework unemployment duration
is considered as a stochastic process whose evolution is
influenced by economicand demographic variables like
unemployment benefits, expected wage offers, training and
age. This is modeled by application of the concept of the
hazard rate which denotes the conditional exit rate from
unemployment over time given elapsed unemployment duration.
Contrasting more traditional models a semi-parametric
approachis chosen which reduces the danger of
mis-specification of the stochastic duration process. This
procedure also is particularly suitable for the analysis of
grouped observations on unemployment duration typically
generated by longitudinal data sets as the German
"Socio-Economic Panel" which is utilized for this study.
Besides deriving a set of empirical results on unemployment
duration in West Germanymethodological issues of duration
analysis are considered with particular attention paid to
the impact of the sample design. Also, important outcomes
from search theory and findings from other hazard rate
analysesare surveyed.
