Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2009:4: Job durations with worker and firm specific effects: MCMC estimation with longitudinal employer-employee data

Guillaume Horny (), Rute Mendes and Gerard J van den Berg
Additional contact information
Guillaume Horny: Bank of France, Postal: DGEI-DEMS-SAMIC, 31 rue Croix des Petits Champs, 75 049 Paris Cedex 01, France
Rute Mendes: Tinbergen Institute Amsterdam
Gerard J van den Berg: IFAU - Insitute for Labour Market Policy Evaluation, Postal: Box 513, SE-751 20 Uppsala, Sweden

Abstract: We study job durations using a multivariate hazard model allowing for workerspecific and firm-specific unobserved determinants. The latter are captured by unobserved heterogeneity terms or random effects, one at the firm level and another at the worker level. This enables us to decompose the variation in job durations into the relative contribution of the worker and the firm. We also allow the unobserved terms to be correlated. For the empirical analysis we use a Portuguese longitudinal matched employer-employee data set. The model is estimated with a Bayesian Markov Chain Monte Carlo (MCMC) estimation method. The results imply that firm characteristics explain around 30% of the variation in log job durations. In addition, we find a positive correlation between unobserved worker and firm characteristics.

Keywords: Job transitions; assortative matching; Gibbs sampling; frailties; dynamic models; matched employer-employee data

JEL-codes: C11; C15; C41; J20; J41; J62

28 pages, February 2, 2009

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