Short- and Long-Term Unemployment: How do Temporary Layoffs Affect this Distinction?.

In this paper, we compare two different types of models for the duration of unemployment spells: the multiple phase duration model and the competing risks model. Both models allow for non-proportionality of the effect of the explanatory variables on the hazard function. The two models are applied to Danish unemployment data containing a large fraction of temporary layoffs. The econometric analysis shows that the results from the multiple phase duration model are contaminated by the presence of temporary layoffs. the multiple phase duration model should therefore be applied with care in order to avoid misinterpretations of the results.