Working Paper: CEPR ID: DP3264
Authors: Maia Gell
Abstract: In the mid-1980s, many European countries introduced fixed-term contracts. Since then their labour markets have become more dynamic. This Paper studies the implications of such reforms for the duration distribution of unemployment, with particular emphasis on the changes in the duration dependence. I estimate a parametric duration model using cross-sectional data drawn from the Spanish Labour Force Survey from 1980-94 to analyse the chances of leaving unemployment before and after the introduction of fixed-term contracts. I find that duration dependence has increased since such reform. Semi-parametric estimation of the model also shows that for long spells, the probability of leaving unemployment has decreased since such reform.
Keywords: Cross-sectional data; Duration model; Turnover
JEL Codes: C41; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased duration dependence of unemployment (J64) | probability of exiting unemployment decreases with longer unemployment spells (C41) |
| introduction of TCS (C87) | segmented unemployment pool (J65) |
| previous job ended due to TCS (J63) | lower uncompleted durations of unemployment (J64) |
| introduction of TCS (C87) | changes in probability of leaving unemployment based on duration (C41) |
| introduction of TCS (C87) | increased duration dependence of unemployment (J64) |