Does Unemployment Cause Future Unemployment? Definitions, Questions and Answers from a Continuous Time Model of Heterogeneity and State Dependence

Recent research demonstrates that, the greater the number of previous spells of unemployment and the longer their duration, the more likely is the event that an individual will be unemployed at a point in time. Two explanations have been advanced to interpret this finding. The first is rooted in economic theory; the second is based solely on statistical considerations.