Examining the degree of duration dependence in the Cape Town labour Market

Type Working Paper - Southern Africa Labour and Development Research Unit
Title Examining the degree of duration dependence in the Cape Town labour Market
Issue 10
Publication (Day/Month/Year) 2008
Page numbers 1-42
URL http://www.saldru.uct.ac.za/home/index.php?/component/option,com_docman/Itemid,32/limitstart,60/
This paper investigates the effects of long bouts of unemployment on the employment probabilities of the unemployed, and the factors affecting unemployment duration. This is achieved through the estimation of the hazard rate. The parametric analysis was conducted using a Weibull regression model. The Weibull estimates indicate that long term unemployment will be more prevalent for young women who care for dependents aged below 16 years, have no grade 12 or tertiary qualifications and have limited proficiency in English. This effect is compounded when the unemployed are marginalised and live with few or no wage earners. Slight positive duration dependence was found, indicating that employment probabilities do not decrease as unemployment duration increases. A graphical depiction of the Weibull hazard indicates that the hazard is initially upward sloping, reaching a maximum at approximately 13 months of unemployment, at which point it declines steeply. At the 13 month turning point, merely 17 percent of respondents have exited from unemployment. Even at its highest, the hazard remains below 8 percent. A piece-wise model was estimated which confirmed the Weibull estimates, but indicated that the hazard follows a more flexible shape and is not monotonic in nature. \n

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