Unemployment Duration: Competing and Defective Risks

Abstract

This paper examines the determinants of unemployment duration in the framework of a competing risks model, where the destination states are employment and inactivity. The major innovation is the use of a split-population approach to accommodate the presence of defective risks in the context of the competing risks model. Certain of the regressors that affect the conditional hazards are allowed to influence defective risks. Unobserved individual heterogeneity among the susceptible populations is also controlled for. Access to unemployment benefits and age are accorded special emphasis because of their influence on defective risks and escape rates.