Duration Dependence in the Exit Rate Out of Unemployment in Belgium: Is it True or Spurious?

Abstract

On the basis of aggregate data for the early nineties, we analyse the determinants ofunemployment duration for laid-off male workers in Wallonia (Belgium). Our resultsdemonstrate that if ranking in recruitment occurs, the standard Mixed Proportional Hazardspecification can be too restrictive, leading to an overstatement of the extent of true negativeduration dependence. We conclude that negative duration dependence is largely spurious.We also decompose the time variation of the hazard in (unobserved) compositional anddirect cyclical and seasonal effects. We find counter-cyclical variation in the quality of youngworkers, but none for the prime aged.

Keywords: unemployment duration, ranking, heterogeneity, business cycle

JEL Classification: C41, J64