Persistencies in the Labour Market

43 Pages Posted: 2 Mar 2009

See all articles by Paul Frijters

Paul Frijters

Queensland University of Technology - School of Economics and Finance

Maarten Lindeboom

Vrije Universiteit Amsterdam; Tinbergen Institute Amsterdam; IZA Institute of Labor Economics

Gerard J. van den Berg

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Abstract

Using longitudinal income-tax registers, we study how past labour market outcomes affect current labour market transition rates. We focus on hysteresis effects of the durations and incidence of previous spells out of work. We estimate flexible multi-state Mixed Proportional Hazard specifications for transition rates between employment, unemployment, and welfare/non-participation. Our main finding is that after longer periods of employment with high income, individuals' transition rates from unemployment to employment increase. Longer periods of non-employment generally decrease future transition rates to work, and sometimes also from work. The quantitative magnitude of persistency and hysteresis effects on inequality is modest.

Keywords: duration analysis, hysteresis, inequality, wages, unemployment, hazard rates, employment, income, work

JEL Classification: J64, J22, C41

Suggested Citation

Frijters, Paul and Lindeboom, Maarten and van den Berg, Gerard J., Persistencies in the Labour Market. IZA Discussion Paper No. 4025. Available at SSRN: https://ssrn.com/abstract=1351189

Paul Frijters (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia
(07) 3864 9364 (Phone)
(07) 3864 1500 (Fax)

HOME PAGE: http://www.bus.qut.edu.au/paulfrijters/index.jsp

Maarten Lindeboom

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6033 (Phone)
+31 20 444 6020 (Fax)

Tinbergen Institute Amsterdam

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gerard J. Van den Berg

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6132 (Phone)
+32 20 444 6020 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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