Labour market transitions following redundancy: an approach with time-varying variables

This paper presents estimates of a model of transitions out of unemployment for a group of redundant workers over a two-year period, using a discrete time approach to the analysis of transitions. The motivation for the approach taken is that it can allow for the easy incorporation of time-varying variables which are difficult to include with traditional duration models. The results show that the time-varying variables may suffer omitted heterogenity biases. Specifically, results for transitions out of unemployment display positive duration dependence, and show that transitions are associated with the time-varying variables reflecting local unemployment rates, individual expected earnings and prior employment experiences.