An Econometric Analysis of Individual Unemployment Duration in West Germany / Studies in Contemporary Economics (PDF)

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.