On the effects of duration on Finnish unemployment

Outi Aarnio
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Outi Aarnio: Åbo Akademi

Finnish Economic Papers, 1989, vol. 2, issue 1, 65-81

Abstract: The overall exit rate from unemployment conditional on duration of unemployment is often shown to be downward sloping. This can be result of a) individual heterogeneity, i.e. some individuals have initially fewer chances finding of job than others or b) negative state-dependence. i.e. unemployment experience worsens individual exit probability from unemployment. This paper provides a test based on time series behaviour to exclude the pure heterogeneity hypothesis. We also apply the test on Finnish data and find support for rejecting pure heterogeneity in favour of some negative state-dependence effects.

Date: 1989
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