Publication: Unemployment duration among immigrants and natives: unobserved heterogeneity in a multi-spell duration model
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2008-12
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Abstract
This paper studies whether the unemployment dynamics of immigrants differ from those of
natives, paying special attention to the impact of accounting for unobserved heterogeneity
among individuals. Using a large administrative data set for Spain, we estimate multiple-spell
discrete duration models which disentangle unobserved heterogeneity from duration
dependence. Specifically, we estimate random effects models assuming that the distribution of
the effects is discrete with finite support, and fixed effects models in which the distribution of the
unobserved effects is left unrestricted. Our results show the importance of accounting for
unobserved heterogeneity and that mistaken policy implications can be derived due to improper
treatment of unmeasured variables. We find that lack of control for unobserved heterogeneity
leads to the conclusion that immigrant males have a higher probability of leaving unemployment
than natives and that the negative effect of unemployment benefits for immigrants lasts longer
than for natives. Nonetheless, the estimates which do control for unobserved heterogeneity
show the opposite results.
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Duration models, Discrete choice, Multiple spells, Unobserved heterogeneity, Unemployment, Immigration