SHORT‐AND LONG‐TERM UNEMPLOYMENT. A PARAMETRIC MODEL WITH TIME‐VARYING EFFECTS

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Abstract
In this paper we present the first application to unemployment duration analysis of a mixture distribution model initially proposed in the biosciences literature by Blackstone, Naftel and Turner (1986). The model is characterized by the decomposition of an aggregate hazard function into a number of distinct hazard functions. The approach allows us to attribute to each function a different set of covariates as well as coefficients. Using US data on displaced workers, we are able to decompose the time varying hazard into two distinct phases — corresponding to short‐term and long‐term unemployment — and in the process evaluate (and reject) the proportionality assumption. We also compare the results from the model with those obtained from the Cox proportional hazards model and with a parametric hazards model in which a Burr specification is employed for the baseline hazard.