http://repub.eur.nl/res/concept/jel-J64/ Recent publications classified by JEL Code J64 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/13650/ 2008-11-01T00:00:00Z This paper investigates the dynamic relationship between self-employment and unemployment rates. On the one hand, high unemployment rates may lead to start-up activity of self-employed individuals (the “refugee” effect). On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods (the “entrepreneurial” effect). This paper introduces a new two-equation vector autoregression model capable of reconciling these ambiguities and estimates it for data from 23 OECD countries between 1974 and 2002. The empirical results confirm the existence of two distinct relationships between unemployment and self-employment: the “refugee” and “entrepreneurial” effects. We also find that the “entrepreneurial” effects are considerably stronger than the “refugee” effects. Thurik, A.R. Carree, M.A. Stel, A.J. van Audretsch, D.B. http://repub.eur.nl/res/pub/10747/ 2007-10-11T00:00:00Z This paper examines the relationship between entrepreneurship (as measured by fluctuations in the business ownership rate) and unemployment in Japan for the period between 1972 and 2002. We find that, although Japan’s unemployment rate has been influenced by specific exogenous shocks, the effects of entrepreneurship on unemployment are not different when compared to other OECD countries. In the past, small firms in Japan benefited from the protective environment of the keiretsu structure. This secure environment no longer exists, and a new market environment conducive to new venture creation and growth has not yet been established. We argue that the Japanese government should actively stimulate an entrepreneurial culture. Stel, A.J. van Thurik, A.R. Verheul, I. http://repub.eur.nl/res/pub/18747/ 2007-10-01T00:00:00Z In 2001-02, Argentina experienced a wrenching economic crisis. Plan Jefes, implemented in May 2002, was Argentina’s institutional response to the increases in unemployment and poverty triggered by the crisis. The program provided a social safety net and appears to have successfully protected families against indigence. Despite this success, the continued existence of the program, which provides benefits to eligible unemployed individuals for an unlimited duration, may have unappealing long-term consequences. Reliance on the plan may reduce the incentive to search for work and in the long-run may damage individual employability and perpetuate poverty. Motivated by these concerns, this paper examines the effect of participating in Plan Jefes on the probability of exiting from unemployment. Regardless of the data set, the specification, the empirical approach and the control group, the evidence assembled in this paper shows that for the period under analysis individuals enrolled in the Plan are at least 20 percentage points less likely to transit to employment as compared to individuals who are not on the Plan. The negative effect of the program tends to be larger for females and as a consequence, over time, the program becomes increasingly feminized. Prima facie, the estimates suggest that programs such as Plan Jefes need to re-consider the balance between providing a social safety net and dulling work incentives. Iturriza, A. Bedi, A.S. Sparrow, R.A. http://repub.eur.nl/res/pub/10443/ 2007-07-02T00:00:00Z A duration model based on the time on Unemployment Insurance (UI) benefits instead of a model based on the time till re-employment is more relevant from a cost-benefit perspective. The contribution of this paper is to extend the standard (mixed) Proportional Hazard model to account for an upper bound on the duration. We use a modified mover-stayer model to this end and discuss the interpretation of the parameters. In an empirical application we compare the method with the standard analysis of unemployment duration. We also derive the expected UI-benefit costs implied by the model for some typical unemployed individuals. Bijwaard, G.E. http://repub.eur.nl/res/pub/10344/ 2007-06-21T00:00:00Z In this article we propose and implement an instrumental variable estimation procedure to obtain treatment effects on duration outcomes. The method can handle the typical complications that arise with duration data of time-varying treatment and censoring. The treatment effect we define is in terms of shifting the quantiles of the outcome distribution based on the Generalized Accelerated Failure Time (GAFT) model. The GAFT model encompasses two competing approaches to duration data; the (Mixed) Proportional Hazard (MPH) model and the Accelerated Failure Time (AFT) model. We discuss the large sample properties of the proposed Instrumental Variable Linear Rank (IVLR), and show how we can, with one additional step, improve upon its efficiency. We discuss the empirical implementation of the estimator and apply it to the Illinois re-employment bonus experiment. Bijwaard, G.E. http://repub.eur.nl/res/pub/10441/ 2007-05-30T00:00:00Z This paper analyzes the impact of corporate taxes on structural unemployment, using an applied general equilibrium model for the European Union. We find that the unemployment and welfare effects of corporate taxes differ considerably among European countries. The magnitude of these effects rise in particular in the broadness of the corporate tax base of a country, and the strength of international spillover effects through foreign direct investment. The effect on unemployment is smaller if the substitution elasticity between labour and capital is large, if international spillover effects operate primarily via multinational profit shifting, and if equilibrium forces on the labour market are strong. Although the effect of corporate taxes on unemployment may be smaller than the effect of labour and value-added taxes (e.g. under relatively strong real wage resistance), the welfare costs of corporate taxation are typically larger for most European countries under plausible parameters, especially under strong international spillovers. Bettendorf, L.J.H. Horst, A. van der Mooij, R.A. de http://repub.eur.nl/res/pub/9779/ 2007-04-24T00:00:00Z In this article we focus on duration data with an endogenous variable for which an instrument is available. In duration analysis the covariates and/or the effect of the covariates may vary over time. Another complication of duration data is that they are usually heavy censored. The hazard rate is invariant to censoring. Therefore, a natural choice is to model the hazard rate instead of the mean. We develop an Instrumental Variable estimation procedure for the Generalized Accelerated Failure Time (GAFT) model. The GAFT model is a duration data model that encompasses two competing approaches to such data; the (Mixed) Proportional Hazard (MPH) model and the Accelerated Failure Time (AFT) model. We discuss the large sample properties of this Instrumental Variable Linear Rank (IVLR) estimation based on counting process theory. We show that choosing the right weight function in the IVLR can improve its efficiency. We discuss the implementation of the estimator and apply it to the Illinois re-employment bonus experiment. Bijwaard, G.E. http://repub.eur.nl/res/pub/7754/ 2006-05-11T00:00:00Z An issue hardly ever mentioned in the analysis of labour market transitions is that for some individuals labour market transitions occur at a very low rate. Therefore, these individuals might stay on disability benefits or in domestic care till they reach the retirement age of 65. This implies that the duration on disability and of non-participating women has a upper bound of the time till retirement. Despite the growing availability of panel data on labour market transitions many household surveys are still based on stock based sampling. In this paper estimation of a duration model in which a positive fraction of individuals reaches a maximum duration is derived for stock sampled data. A mixed proportional hazard model with a piecewise constant baseline hazard leads to a relatively simple closed-form expression in the log likelihood. Discrete unobserved heterogeneity is assumed. Non-constant entry rates into the labour market state are allowed for by assuming a yearly fluctuating rate. Bijwaard, G.E. http://repub.eur.nl/res/pub/6599/ 2005-02-02T00:00:00Z Do people move to cities because of marriage market considerations? In cities singles can meet more potential partners than in rural areas. Singles are therefore prepared to pay a premium in terms of higher housing prices. Once married, the marriage market benefits disappear while the housing premium remains. We extend the model of Burdett and Coles (1997) with a distinction between efficient (cities) and less efficient (non-cities) search markets. One implication of the model is that singles are more likely to move from rural areas to cities while married couples are more likely to make the reverse movement. A second prediction of the model is that attractive singles benefit most from a dense market (i.e. from being choosy). Those predictions are tested with a unique Danish dataset. Gautier, P.A. Svarer, M. Teulings, C.N. http://repub.eur.nl/res/pub/6639/ 2004-06-01T00:00:00Z In this paper we develop a structural model for job search behavior of students entering the labor market. The model includes endogenous search effort and on-the-job search. Since students usually do not start a regular job before graduation but start job search earlier, our model is non stationary even if all structural parameters are constant. The model explains the common finding that a substantial share of individuals starts working immediately upon graduation. We estimate the model using a unique data set of individuals who completed undergraduate education in the Netherlands between 1995 and 2001. Our estimation results show that a 1 percent point decrease in unemployment rate increases wage offers with 3 percent, that there are substantial returns to work experience and that individuals devote less effort to job search than optimal. Employment rates at graduation could be increased from 40 percent to 65 percent if all individuals start job search 6 month prior to graduation. Klaauw, B. van der Vuuren, A.P. van Berkhout, P. http://repub.eur.nl/res/pub/6640/ 2004-06-01T00:00:00Z We examine wage competition in a model where identical workers choose the number of jobs to apply for and identical firms simultaneously post a wage. The Nash equilibrium of this game exhibits the following properties: (i) an equilibrium where workers apply for just one job exhibits unemployment and absence of wage dispersion; (ii) an equilibrium where workers apply for two or for more (but not for all) jobs always exhibits wage dispersion and, typically, unemployment; (iii) the equilibrium wage distribution with a higher vacancy-to-unemployment ratio first-order stochastically dominates the wage distribution with a lower level of labor market tightness; (iv) the average wage is non-monotonic in the number of applications; (v) the equilibrium number of applications is non-monotonic in the vacancy-to-unemployment ratio; (vi) a minimum wage increase can be welfare improving because it compresses the wage distribution and reduces the congestion effects cause! d by the socially excessive number of applications; and (vii) the only way to obtain efficiency is to impose a mandatory wage that eliminates wage dispersion altogether. Gautier, P.A. Moraga-Gonzalez, J.L. http://repub.eur.nl/res/pub/1091/ 2004-01-06T00:00:00Z This paper investigates the age-dependency of participation and unemployment by integrating job search with intertemporal optimizing behavior of finitely-lived households. We find that search frictions and tax rates distort the decisions of older workers to a much larger extent than that of young workers. This finding provides an explanation of the observed fall of participation rates of elder workers as a result of the post-war increase in tax rates and replacement rates. We show that the age pattern of search unemployment does not match observed unemployment and we propose a new concept of ‘voluntary’ unemployment that agrees well with observations. Bettendorf, L.J.H. Broer, D.P. http://repub.eur.nl/res/pub/6712/ 2003-03-31T00:00:00Z This paper investigates the age-dependency of participation and unemployment by integrating job search with intertemporal optimizing behavior of finitely-lived households. We find that search frictions and tax rates distort the decisions of older workers to a much larger extent than that of young workers. This finding provides an explanation of the observed fall of participation rates of elder workers as a result of the post-war increase in tax rates and replacement rates. We show that the age pattern of search unemployment does not match observed unemployment and we propose a new concept of 'voluntary' unemployment that agrees well with observations. Bettendorf, L.J.H. Broer, D.P. http://repub.eur.nl/res/pub/6788/ 2003-01-09T00:00:00Z We analyze a model of directed search in which unemployed job seekers observe all wage offers. We allow for the possibility of multiple applications by workers and ex post competition among vacancies. For any number of applications, there is a unique symmetric equilibrium in which vacancies post a common wage. When workers apply to only one vacancy, a single wage is paid and the resulting equilibrium is efficient. When workers make multiple applications, there is dispersion in wages paid, and equilibrium may be inefficient. We show that our results also hold in a steady-state version of the model. Albrecht, J.W. Gautier, P.A. Vroman, S.B. http://repub.eur.nl/res/pub/6846/ 2001-08-27T00:00:00Z We analyze the implications of multiple applications by job seekers for the micro-foundations of the aggregate matching function. We emphasize a coordination failure caused by multiple applications that has not been previously considered, namely, that firms can waste time and effort processing an applicant who is ultimately hired by another firm. Albrecht, J.W. Gautier, P.A. Vroman, S.B. http://repub.eur.nl/res/pub/7803/ 1997-04-24T00:00:00Z In the past decades several features of U.S. unemployment dynamics have been investigated empirically. The original focus of research was on the duration of unemployment. In later studies the cyclicality of incidence and duration, compositional effects and duration dependence of the exit rate out of unemployment have been investigated. Unlike the partial approach of previous studies this paper takes all elements of unemployment dynamics simultaneously into account. We find that cyclical fluctuations in unemployment are driven by variations in the incidence, individual exit probabilities and the composition of the inflow into unemployment. We also find negative duration dependence of the unemployment exit rate which can be attributed to employers ranking workers according to the length of their unemployment spell. Abbring, J.H. Berg, G.J. van den Ours, J.C. van