Household income and the duration of unemployment: new evidence from Japan

Falaris, Evangelos M.Economists have analyzed various aspects of unemployment, such as factors that may affect individuals' choices while unemployed. In particular, economists have examined personal characteristics that may influence an individual's unemployment duration. I investigate the impacts of individual characteristics on the length of unemployment duration in Japan by using the 2002 Employment Status Survey. I use a household income equation for those who did not complete their unemployment spells before the date of the survey and a multiple imputation technique introduced by Rubin (1996) to generate household income for those who were employed at the time of the survey but whose unemployment spells ended before the time of the survey. I take account of the added-worker effect and assume that the longer spell of unemployment an individual has, the stronger the added-worker effect she faces. I use a Weibull parametric duration model. Furthermore, I use Heckman and Singer's method (1984) to include unobserved heterogeneity. The results indicate that in a model that does not control for unobserved heterogeneity, unemployment duration and the level of household income are negatively associated, which is inconsistent with search theories. However, when including unobserved heterogeneity, unemployment duration and the level of household income are positively associated on the margin for some ranges of household income. The findings of this study have implications for Japanese labor market policies.University of Delaware, Department of EconomicsPh.D