Volume 38, Number 1 (Winter) 2003
Addison, John T., and Pedro Portugal. 2003. "Unemployment Duration: Competing and Defective Risks." Journal of Human Resources 38(1):156-191.
This paper examines the determinants of unemployment duration in a competing risks framework with two destination states: inactivity and employment. The innovation is the recognition of defective risks. A polynomial hazard function is used to differentiate between two possible sources of infinite durations. The first is produced by a random process of unlucky draws, the second by workers rejecting a destination state. The evidence favors the mover-stayer model over the search model. Refinement of the former approach, using a more flexible baseline hazard function, produces a robust and more convincing explanation for positive and zero transition rates out of unemployment.
John T. Addison is Hugh C. Lane professor of economic theory, Moore School of Business, University of South Carolina, and a research fellow at the Institut zur Zukunft der Arbeit (IZA). Pedro Portugal ia a senior economist with the Departamento de Estudos Económicos do Banco de Portugal, and is an associate professor at the Universidade Nova de Lisboa. The authors thank the Fundação para a Ciência Tecnologia for financial support. They are grateful for the helpful comments of João Santos Silva and Manuel Arellano and those of two anonymous reviewers. Lucena Vieira provided excellent computational assistance. The data used in this article can be obtained August 2003 through July 2006 from Pedro Portugal, Banco de Portugal, Av. Almirante Reis 71, 1150 Lisboa, Portugal.
© 2003 by the Board of Regents of the University of Wisconsin System
US ISSN 0022-166X