DP3957 Estimating the Probability of Leaving Unemployment Using Uncompleted Spells from Repeated Cross-Section Data

Author(s): Maia G├╝ell, Luojia Hu
Publication Date: July 2003
Keyword(s): duration analysis, GMM, repeated cross-section data, unemployment
JEL(s): C41, J64
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3957

We propose a new econometric estimation method for analysing the probability of leaving un-employment using uncompleted spells from repeated cross-section data, which can be especially useful when panel data are not available. The proposed method-of-moments-based estimator has two important features: (1) it estimates the exit probability at the individual level and (2) it does not rely on the stationarity assumption of the inflow composition. We illustrate and gauge the performance of the proposed estimator using the Spanish Labor Force Survey data, and analyse the changes in distribution of unemployment between the 1980s and 1990s during a period of labour market reform. We find that the relative probability of leaving unemployment of the short-term unemployed versus the long-term unemployed becomes significantly higher in the 1990s.